Deutsche Bank: If Warsh Avoids Policy Signals, Carry Trade Opportunities Will Emerge

George Saravelos, Global Head of FX Research at Deutsche Bank, stated that Federal Reserve Chairman Kevin Warsh's goal is "to avoid expressing views on monetary policy this year as much as possible, thereby minimizing the impact on market pricing." If Warsh succeeds in doing so, the U.S. dollar is likely to weaken, and "the path for summer carry trades will be wide open." In a note to clients on Wednesday, the bank indicated that as the limited market impact from the Iran conflict fades, it is "difficult not to be positive" on risk assets. The bank noted that global economic growth forecasts have barely changed since last year, and this resilient growth outlook "is not a particularly bullish signal for the U.S. dollar." Deutsche Bank also believes that, in terms of the potential for upward revisions to growth expectations in the coming months, Europe "has the greatest potential."