Deutsche Bank recommends forex crosses over dollar trades By Investing.com

Deutsche Bank strategists said they are staying on the dollar sidelines and favor FX crosses, noting that geopolitical risk around Iran and the Strait of Hormuz is reducing conviction in a broad dollar downtrend. They highlighted two sets of currencies: commodity/carry beneficiaries such as the AUD, NOK, BRL, and MYR, and defensive or oversold currencies including the CNY, JPY, and GBP. The U.S. is seen as a beneficiary of AI investment and higher commodity prices, while Fed reaction-function uncertainty remains elevated.

Analysis

The bigger setup is not a generic “strong dollar vs weak dollar” call but a regime where FX dispersion matters more than outright USD direction. If energy stays bid and AI capex keeps pulling U.S. real rates and growth expectations higher, the U.S. can look like the cleanest relative-growth jurisdiction even while the dollar underperforms versus commodity and carry currencies. That creates a split market: exporters and commodity-linked FX can rally together, while crowded dollar longs get punished on idiosyncratic geopolitical headlines rather than macro data.

The most interesting second-order effect is that the supposed beneficiaries are not all cyclical in the same way. AUD/NOK/BRL/MYR gain from terms-of-trade and carry, but they also become vulnerable if the geopolitical premium fades and commodity volatility compresses; those are better expressed as tactical FX crosses than as long-duration macro views. On the defensive side, JPY/CNY/GBP likely offer asymmetric downside protection, but for different reasons: the yen on crisis hedging, the yuan on policy management, and sterling on positioning rather than fundamentals.

For equities, the article’s underappreciated point is that AI spend is still acting like a broad capital-allocation tax in favor of a handful of infrastructure names. If NVDA prints well, the market likely rewards the whole compute stack first, but the second-order winner is not just suppliers — it is anyone levered to sustained hyperscaler capex expectations. The risk is that the bar is now high: a merely good report may not expand multiples if guidance implies digestion later in the year, especially with geopolitical headlines keeping macro hedges expensive.

The contrarian read is that the market may be overpricing persistent tail-risk and underpricing policy normalization. If Iran risk de-escalates even modestly, the USD could bounce via a sharp reversal in risk premia, while the commodity FX basket would be vulnerable to a fast unwind. That argues for expressing the view with defined-risk structures rather than outright spot, because the move is likely to be sharp but not necessarily durable.

Key Decisions for Investors

• Long NVDA into earnings with a tight post-print risk box; prefer call spreads over stock to capture upside from a guidance beat while limiting downside if the market sells the news.
• Pair trade: long AUD/JPY or NOK/JPY for a 1-3 month horizon; captures commodity/carry strength while keeping the hedge against broad risk-off via the yen leg.
• Fade crowded dollar weakness with a tactical long USD/CNY or USD/JPY hedge if geopolitical headlines de-escalate; this is a lower-conviction trade, but offers strong convexity if the safe-haven bid reverses.
• Add selective exposure to the AI supply chain via SMCI and APP only on pullbacks; both remain high-beta beneficiaries, but position size should be smaller than NVDA because their multiple expansion is more fragile.
• Avoid chasing DB’s suggested commodity FX basket outright; instead, express via option structures on AUD or NOK to reduce the risk of a fast reversal if oil or geopolitical premia normalize.