As if you needed any further proof that the Trump administration has no fucking clue what’s going and no conception whatsoever about the dramatic consequences of the things they say in public, Thursday has been nothing short of a circus for the dollar thanks entirely to the chaos Steve Mnuchin set in motion on Wednesday in Davos.
As outlined in painstaking detail in “Steve Mnuchin And The Danger Of Thinking Out Loud When You Don’t Know Shit“, the Treasury Secretary has turned an implicit global currency war (competitive easing) into an explicit currency war, engendering all kinds of ill-will in the process.
In addition to pissing off Ray Dalio (see linked post above), Mnuchin has “succeeded” in getting called out by Mario Draghi in the post-ECB presser. Long story short (the long version is here), Mnuchin has just made it immeasurably more difficult for the ECB to lean hawkish.
Following Draghi’s comments (which came after an initial attempt to jawbone the euro lower backfired spectacularly resulting directly in a spike), sources would later suggest the central bank is indeed leaning towards postponing any further hawkish forward guidance in light of recent events. Here’s Bloomberg:
As the European Central Bank considers when to start signaling the end of its crisis-era stimulus, some officials prefer delaying any significant change in language until June, according to people familiar with the matter.
While one faction of the Governing Council wants to start a series of small tweaks in their policy wording at the next meeting on March 8 — setting them on the path to winding down their bond-buying program — others prefer to gather more evidence that inflation will pick up, said the people, asking not to be identified because the debate was private. No decision has been taken, the people said.
And here’s the Scarface version:
so they're going to wait to signal anything else and see if that waiting sends a sufficiently dovish message to keep the euro at bay.
the war is accelerating. pic.twitter.com/Xlxk4tgYkE
— Heisenberg Report (@heisenbergrpt) January 25, 2018
Well no sooner had that hit than Trump’s interview with Joe Kernen landed and guess what? Trump tried to jawbone the dollar back higher, apparently realizing that this has already turned into a shitshow:
Take a look at this:
This is laughably absurd. Trump and Mnuchin have created utter chaos. This would be bad enough if they knew what they were doing, but the schizophrenic rhetoric quite clearly suggests they don’t.
These are your markets on Trump. Any questions?
Glad I have substantial investments ex-US but priced in dollars…
“Ultimately” wants to see a strong dollar – when his replacement is in office.
Great article btw. Your DXY graph is a perfect example that shows Trump’s gross incompetence graphically – as he constantly speaks on things he has not prepped for and has insufficient knowledge of to be credible (or generally understood) – and therefore is constantly contradicting himself or reversing his previous positions – and of course then denying that he is.
Just as Trump claimed and of which most of the moderately intelligent citizens of the world now know – the Washington DC swamp is indeed full of slimy creatures – for-profit, self-interest first, lizard brained professional and career politicians, but at least most learn when to keep their mouths closed – making it less likely they end up with one or both feet in them.
Trump is also a super slimy, for-profit, self-interest first opportunist and second generation career real estate con artist – with zero political or real deal making skills. Trump’s idea of a “deal” is when he can have complete control over the other party. If he can’t have that control he takes his little ball(s) and goes home. Sadly, Trump doesn’t know how to accomplish a deal unless it is with a club or at gun point.
US enemies – both political, military and economic and those that are all of the aforementioned – start each day by saying thanks to their respective deities for their gift of Donald J. Trump’s #MAGA and his gross incompetence – in both his legal and illegal “executive decision.” Most especially they congratulate themselves on corrupting the “faux US democracy” controlled now by big money interests – and clearly both domestic and foreign.
It’s gibberish and in circles too – nothing substantial – just words falling out of his lying phony mouth – not one word made a lick of sense… uh, make that cents.
Draghi’s presser: “The exchange rate has moved in part because of endogenous reasons, namely the improvement in the economy, and in part due to exogenous reasons that have to do with communication. But not by the ECB, but by someone else. This someone else’s communication doesn’t comply with the agreed terms of references.”
In other words, the Americans are currency manipulators – and hypocrites insofar AFAIK the US Treasury is the only one that publishes a (politically motivated) list pointing fingers at others when in fact it could most deservedly be pointed at themselves (and the Swiss, which is another story).
Sorry kiddies, this is NOT new to the current US admin. Former Treasury Secretary Geithner and the Bernanke Fed manipulated the dollar lower too.
The difference is that now they’re heating up the currency war and pulling less punches. Like how Draghi essentially called Mnuchin a currency manipulator (which he is, of course, but so is Draghi). Expect more shots more forcefully in the future…
What next,..Kuroda saying their money is printed on recycled toilet paper and thus worth shit?…lol
Created a shitshow of chaos? Don’t know what their talking about???? This has to be just about the most naïve perspective I’ve seen. They, and the private trading floors operated on their personal behalf, know exactly what they are talking about and, believe me, this is no accidental clown show. Have you any idea how much money was just made on this. I myself placed a leveraged bet expecting the possibility of this and cashed it for a 200% gain – and it was sloppy on the timing. Imagine what I would have made had I known Trump was going to back-peddle.
^ Naw, I think it’s a shitshow that they’re mostly making up as they go… Everywhere (except for Draghi trying to eventually force the creation of a Eurobond through the backdoor by jacking up the ECB balance sheet so high that it leaves no alternative for the Germans but to finally accept the creation of a Eurobond on their credit).
As for the Trump Admin, it has regularly since the beginning referred to the level of the dollar in citing concerns about America’s massive & growing twin deficits (trade and current account). As in quantum physics, you can’t simultaneously act on and observe something. So nothing new here except for their laughable execution (I don’t think a US president ever before rushed onto CNBC to make a dollar statement).
But make no mistake, in fact ALL the major central banks (ECB, BOJ, SNB, Fed, BOE, BOC, RBNZ) have publicly discussed the relative strength of their currencies in connection to interest rate decisions. It has been a mild currency war, with boundaries, being escalated as all wars are eventually – something for the Trump admin to consider before he starts the trade wars (alas, he already has!).