Deutsche Bank warns trade tensions threaten USD’s funding edge, sees rotation out ...Middle East

Strategists remain structurally bearish on the U.S. dollar, warning that reputational damage from the trade war could gradually erode investor confidence:

dollar is now increasingly influenced by valuation, capital, and hedging flows rather than interest rate differentialsthe U.S. current account deficit—nearing 4% of GDP—is historically a drag on the currencyAmerica's deeply negative net international investment position leaves it exposed, as foreign investors hold large volumes of U.S. assets

That said, Deutsche Bank notes key risks to its view. A softer U.S. trade approach and a more growth-friendly fiscal policy could slow the pace of dollar weakness. On the other hand, more erratic trade policies or aggressive fiscal tightening could accelerate the dollar’s decline.

This article was written by Eamonn Sheridan at www.forexlive.com.

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