Mnuchin comment surprises financial markets, turns dollar decline into ‘one-way bet’

  • The dollar, already on a spiral lower, sank to a three-year low after Treasury Secretary Steven Mnuchin said a weaker dollar was good for U.S. trade.
  • The comments depart from the strong dollar policy of Treasury secretaries before him, going back to Robert Rubin in the Clinton administration, but fit with the Trump administration’s “America first” message.
  • The weak dollar policy could backfire and make U.S. assets like Treasurys less appealing, and drive up the costs of foreign goods for businesses and everyday Americans.
  • “They basically open this up as a one-way bet for traders, and traders will keep pushing it and keep pushing it,” said one strategist. Read More @ https://www.cnbc.com/2018/01/24/mnuchin-comment-surprises-financial-markets-turns-dollar-decline-into-one-way-bet.html


With a backdrop of concern about US protectionism and a possible abandonment of the 23-year old strong dollar policy, and among the weakest sentiment toward the dollar in at least a decade, the ECB takes center stage. 
What a turn of events for Mr. Draghi, the President of the European Central Bank.  A year ago today, the euro was traded between $1.0710 and $1.0770.  There were profound concerns that the populist-nationalist wave that spurred the UK to reject the EU in a referendum and ushered in a colorful real estate magnate turned television icon as president of the United States, would sweep across Europe in a series of elections.  Moreover, the structural challenges of a monetary union without a fiscal union and an incomplete banking union at that weighed on investor sentiment.
A year later, the euro is approaching $1.25, and more importantly, continues to trend higher on a trade-weighted basis.  Its trade-weighted index appreciated by 2% since the middle of last month and is up 10% since it was clear Macron was going to win the first round of the French Presidential election last April.   Greece is making good headway to exit its third assistance program since 2010.   And the monetary union is likely to continue to gradually grow.
Mr. Draghi, meet too much of a good thing.  The appreciation of the euro is blunting some of the accommodation the ECB is continuing to provide.  The rising euro dampens price pressures, slows growth through exports, and shaves corporate earnings.  That said, the magnitude of the impact still seems marginal, though no less undesirable.   Before the monetary union, Europe consistently mostly of small open economies.  Open refers to the importance of the external sector.  However, in essence, the monetary union created a larger and less open economic bloc.  (Marctomarket).
  • 8.45pm – ECB will announce the rate – and we don’t expect any change. Little Volatility expected.
  • 9.30pm – ECB will have a press conference and this will create a huge volatility as Mario Draghi will give a view on what will be their next move in terms of monetary policy – we believe the impact will be the same as BOJ.

Be cautious and have good money management at all times.

High Risk Investment Warning:

Please note that Forex and other leveraged trading involves significant risk of loss, It is not suitable for all traders and you should make sure you understand the risks involved, it is recommended that you seek an independent advice, if necessary.

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