Trump’s comments are the main talking point - BBH

In view of the analysts at BBH, President Trump's comments are the main talking point today and even though his claim that the dollar is too strong is not new, but it is the first time he has ventured down that path since the inauguration.  

Key Quotes

“His comments follow a three-month decline in the broad measure of the dollar.  If a leader of another country said what he did, they likely would be accused of manipulating their currency.   That said, in the US Treasury's criteria of currency manipulation, jawboning does not count.  Still, it seems a departure from the G7 and G20 agreements, and like areas, this is an example of unilateralism.”

“Trump made several other revelations that may be important for investors.  He revealed that China will not be cited as a manipulator, but refused to be drawn into a discussion whether this was partly in exchange for cooperation from China on the North Korea issue.  A few hours before Trump's interview was released, China abstained from the UN Security Council resolution condemning the chemical attack in Syria.  Since 2011, China has vetoed US-sponsored Security Council resolutions on Syria.  Russia vetoed it yesterday.  Abstaining sent an important diplomatic signal.”

“The US President also changed his stance regarding NATO.  He said it is no longer obsolete.  However, he still harangued NATO head Stoltenberg about compensation for the US carrying the load for NATO.  Two overlooked points should be noted.  First, Germany's Vice Chancellor has argued that in addition to the country's 1.2% defense budget, it spent around 0.7% on dealing with refugees in part from past military efforts, like in Libya.  Second, in a ground war, Germany and Europe will likely pay much more than 2% of GDP.  The US may pay in advance, Europe later.”

“Trump also reversed his earlier opposition to the Export-Import Bank.  He also returned to an earlier position that health care reform needs to precede tax reform.  He also had spoken well of Yellen and kept the door open to her reappointment.  Volcker, Greenspan and Bernanke, the last three Fed chairs, were each appointed by the President of one party and reappointed by the President of the other party.   His admission of preferring low interest rate policy is not surprising, though he accused Yellen during the campaign of keeping rates low to help Clinton.  Preferences do not drive exchange or interest rates, and low rates seem to run against the stronger growth that he is advocating.”

“The US dollar slid after these comments yesterday afternoon.  The sell-off extended into early Asian activity, before stabilizing.  It is mixed in late morning European turnover, which is already lightening up due to the extended Easter holiday.”