Recently, the escalation of trade tensions has attracted market attention. Deutsche Bank's Global Foreign Exchange Research team pointed out an interesting phenomenon: as trade disputes between the US and Europe intensify, Europe's position as the largest holder of US assets may lead to changes in its asset allocation strategy.

Data shows that European countries collectively hold about $8 trillion in US bonds and stocks, nearly twice the total of other regions worldwide. In other words, Europe's influence in the US financial markets is significant.

George Saravelos, Head of Global Foreign Exchange Research at Deutsche Bank, mentioned in a recent analysis report that the current US international investment position is at a historic low, indicating that the financial market linkages between the US and Europe are closer than ever. If Europe considers adjusting its US asset holdings, it will inevitably have a substantial impact on the dollar's trend and the euro exchange rate.

What does this interdependence mean for traders? Every change in trade policy could be reflected in the foreign exchange market through capital flows. It is worth paying close attention to how the policy game between Europe and the US evolves and its long-term impact on global asset allocation.