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?