George Saravelos and Tim Baker at Deutsche Bank anticipate a major decline in the value of the U.S. dollar because of reputation loss and systemic problems. Saravelos increased dollar confidence crisis concerns in his March warning about the dollar losing its safe-haven status due to its stock disconnection. The strategists at Deutsche Bank presented their concerns about upcoming challenges for 2025 which include the biggest U.S. trade policy change in 100 years and a major evaluation of U.S. leadership since World War II.
According to them these factors create conditions for a prolonged decline in dollar value. Major rivals pushed the ICE U.S. Dollar Index (DXY) to a three-year low of 99.27 during the week as the currency experienced an 8% year-to-date decrease. The dollar strengthened because investors believed Trump might reduce trade restrictions and this led to consecutive stock market gains of DJIA SPX and COMP alongside Treasury market appreciation. The dollar faces an unfavorable future because Treasury Secretary Scott Bessent believes a U.S.-China trade agreement will require extensive years to materialize.
According to Deutsche Bank predictions the “higher for longer” dollar era will end as the EUR/USD pair will rise to 1.30 by 2029 which represents its highest level since 2014 and matches purchasing-power parity. The analysts demonstrate that international investors show no interest in funding U.S. twin deficits because of ongoing policy ambiguity. They expressed their concern about market dislocations because of changing norms according to their research.
Markets remain in disorder because of Trump’s tariffs while investors worry about enduring trade disputes. Investors look for tariff reductions but the strategists believe that fundamental problems continue to diminish U.S. financial influence. Trade policy uncertainty coupled with geopolitical risks and fiscal problems create structural challenges which diminish the dollar’s position as the global reserve currency. The bearish perspective from Deutsche Bank demonstrates that currency volatility stems from both domestic policy mistakes and decreasing international trust.
