Deutsche Bank has launched a critique of the “currency war” theme making the rounds, saying that states have too much at stake to choose protectionism.
From Deutsche Bank:
Despite the recent battle of words, we believe a “currency war” or a “trade war” in the true sense of the word is unlikely. Politicians in the affected countries will realise that an aggressive policy response to the upcoming next round of quantitative easing in the US and elsewhere is too damaging in the inter-connected world we live in.
So they’re argument is we’re going to see defensive moves rather than offensive, states putting capital controls in place, currency intervention, and global monetary easing. That’s right, more easy money for everyone.
Well, almost everyone. It’s unlikely, in Deutsche Bank’s view, that the euro will devalue. Instead, the currency is likely to head higher vs. the dollar. So watch out if you’re planning a European holiday.
Check out the run up it has made thus far, since the lows of the sovereign debt crisis.
Photo: Deutsche Bank