Posted by on August 31, 2017 4:06 pm
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Categories: Business Debt Ceiling default donald trump Economy European Central Bank Finance Gary Cohn Mnuchin money Reserve Currency Reuters Steven Mnuchin Surnames U.S. Treasury United States Department of the Treasury US Federal Reserve

The smell of currency war is rising in the air.

Less than six hours after the ECB lobbed the first trial balloon of the day, when Reuters reported that ECB policymakers were “growing worried” about the recent rapid gains in the Euro, sending the EURUSD sharply, if briefly lower, the entire move is now a distant memory following jawboning from US Treasury Secretary Steven Mnuchin, who moments ago said on CNBC that “having a weaker dollar is somewhat better for trade“, a statement which immediately spooked algos into dumping the USD…

… selling the USDJPY by 30 pips to 109.90…

… and sending the EURUSD right back to 1.19, where it was before the ECB’s Reuters “intervention.”

And while Mnuchin also added that a strong USD in the long-term “reflects confidence”, algos decided to ignore that. His key statement below:

As it relates to trade, having a weaker dollar is somewhat better for us. What I’ve said consistently is: Where the dollar is in the short-term is less of a concern for me. I do think over long periods of time, the dollar strength is an indication of the reserve currency and the confidence that people have in the U.S. economy.”

Then again, when asked by Liesman if a strong dollar is good for the U.S., he responded “it’s not a question of whether it’s better or not, it’s somewhat inevitable given the strength of the U.S. economy and the confidence that people have.”

While not nearly as FX moving, Mnuchin also said that the Administration’s aim is to get a 15% tax rate, explicitly said he was working with Gary Cohn and other lawmakers on the tax plan. Mnuchin also said that he meets with Yellen on a weekly basis and has a “constructive dialog” with the Fed chair, although he refused to comment on her future, and said Trump would decide the next Fed chair.

More amusingly, on the topic of the tax package he vowed that “there absolutely is a tax package”, that revenue neutrality remains under discussion, and promised that the tax reform package will pacy for itself with US “growth.”

Finally, he said that while more money is needed for Harvey, he wouldn’t say how much, while on the topic of the debt ceiling he did note that “nobody would let the US default.”

His key comments courtesy of Bloomberg:

  • MNUCHIN: HAVING A WEAKER USD IS SOMEWHAT BETTER FOR U.S. TRADE
  • MNUCHIN: THERE ABSOLUTELY IS A TAX PACKAGE
  • MNUCHIN: TAX PACKAGE SHOULD BE PAID FOR WITH ECONOMIC GROWTH
  • MNUCHIN HE’S BEEN WORKING WITH COHN, LAWMAKERS ON TAX PLAN
  • MNUCHIN SAYS BLUEPRINT TO BE RELEASED FOR CONGRESSIONAL REVIEW
  • MNUCHIN SAYS REVENUE NEUTRALITY IS UNDER DISCUSSION
  • MNUCHIN: PLAN INCLUDES MIDDLE-CLASS TAX CUT, SIMPLIFICATION
  • MNUCHIN SAYS OBJECTIVE IS TO GET CORPORATE TAX RATE TO 15%
  • MNUCHIN: TAX PACKAGE SHOULD BE PAID FOR WITH ECONOMIC GROWTH
  • MNUCHIN: SEPT. 29 DEBT CEILING DATE COULD MOVE A LITTLE
  • MNUCHIN SAYS WE’RE ON TRACK TO GET TAX PLAN BY YEAR END
  • MNUCHIN SAYS NEXT BIG CASH DATE IS SEPT. 15 W/ CORPORATE TAXES

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