The top in the US dollar is in – Deutsche Bank

The currency team at Deutsche Bank is out with a big call today, saying that the US dollar has peaked.

Analysts there argue that the newsflow on Thursday and Friday was materially negative for the US dollar and marks a top. The drivers for dollar strength this year were:

  • Safe have flows
  • Fed hiking
  • China’s uncompromising pursuit of covid zero
  • Russia-Ukraine war
  • Last week, there were positive developments on all those fronts with the US inflation report, clear signs of China shifting to a ‘living with covid’ model and Russia retreating from Kherson.

    Deutsche Bank emphasizes that none of the risks are gone but that they’re the trigger for unwinding a crowded USD-long trade.

    “None of the above developments give the all clear on global inflation and
    geopolitical risks. But what they do achieve is a remarkable simultaneous
    compression of the risk premium that has driven dollar strength throughout this
    year,” writes FX strategist George Saravelos.

    He ponders…

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