If you thought last week was crazy, this week has the potential to be just as manic.
Last week began with the government partially shut down in the U.S., a state of affairs that stemmed at least in part from the President undercutting the bipartisan immigration push by calling the whole of Africa a giant “shithole”. Washington decided to kick the can on the shutdown to next month and with that domestic “distraction” out of the way, Trump was free to get back to more ambitious projects, like rolling back seven decades of progress on global trade by inexplicably starting a residential washing machine war with the South Koreans. Having thus set the stage, Trump took the band on a world tour to Davos where, upon getting off the plane, Steve Mnuchin had an opportunity to allay fears that the tariffs Trump slapped on laundry and sun gathering equipment 36 hours prior were the start of a trade war.
Given that Mnuchin is rational and not prone to just parroting Trump’s agenda at the worst possible time and under the worst possible circumstances (i.e. at a globalist gathering that definitely isn’t about isolationism), Mnuchin took the high road and declined to comment … I’m just kidding. He said a weaker dollar is good for U.S. trade.
That triggered a mini-panic in FX markets as the dollar careened lower. The next day, an irritated and noticeably flummoxed Mario Draghi chided “someone else” at the ECB presser and roughly 5 hours later, CNBC decided maybe it was time to do some damage control, so they released a clip from an interview with Trump that found the President talking about the relative merits of a stronger dollar. “The gun was not loaded!”
The whole thing culminated on Friday with Kuroda and the BoJ effectively switching roles from earlier in the week. On Tuesday, the bank tweaked the language around their inflation outlook only to have Kuroda walk it back in the post-meeting presser, and on Friday, Kuroda sounded an upbeat tone on inflation at a panel discussion in Davos only to have the BoJ issue a “clarification” hours later to arrest a rapid move lower in USD/JPY.
