Morgan Stanley has been talking about this for awhile and they picked up on the topic after Mnuchin comments yesterday.As we know with president Trump nothing is out of question so Todays trade balance data and tomorrows Export information within GDP will be something I am watching
The end of the strong dollar policy?
Not yet, but we should watch closely. Comments from US Treasury Secretary Mnuchin yesterday were interesting to us. While formally affirming the strong dollar “over the long term”, what was notably absent was an affirmation that a strong dollar was broadly and unconditionally appropriate. If the US administration rhetoric were to shift to sound more actively encouraging of a weaker USD, investors might start to price in a greater probability of unilateral action to pursue this course. As we noted in our article ‘FAQ on US Intervention Policy’, the US Treasury Department has the means to sell up to US$68 billion unilaterally to weaken USD,and this can be done without Congressional approval and without participation from the Fed. While such action is not our base case, we are watching rhetoric closely to see how the administration’s views on USD evolve.