Euro Weakness From Trump Capped Due to Limited US Asset Holdings, Says Deutsche

Bloomberg Report: Euro's Resilience Amid US Trade Tensions

According to a strategist at Deutsche Bank AG, the euro may not experience significant negative effects from President Donald Trump’s renewed trade threats against European nations regarding Greenland. This is largely due to the United States’ substantial dependence on European capital.

George Saravelos, who leads global foreign exchange research at Deutsche Bank, highlighted in a recent client note that Europe stands as the largest creditor to the US. European countries collectively hold approximately $8 trillion in American bonds and stocks—nearly double the holdings of all other regions combined.

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Saravelos noted that, as the Western alliance faces increasing geopolitical uncertainty, it is uncertain whether European nations will continue to play the same financial role as before. He suggested that recent developments could prompt a shift away from the dollar.

He also pointed out that the latest tariffs imposed by Trump on European countries in relation to Greenland might actually foster stronger political unity within Europe. As a result, any downward pressure on the euro against the dollar may be short-lived this week.

Looking ahead, Saravelos emphasized the importance of monitoring whether the European Union will implement its anti-coercion mechanism. According to a source familiar with the matter, French President Emmanuel Macron is expected to advocate for this move.

Saravelos further explained that, with the US’s net international investment position at historically low levels, the financial interdependence between Europe and the US has reached unprecedented heights. He warned that disruptions to capital flows, rather than trade, could have the most significant impact on financial markets.

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