Is a strong dollar good for the economy? The Trump administration made previous comments that a strong dollar would hurt the U.S. trade position, but we may be looking at a change in that stance. Treasury Secretary Steve Mnuchin said in an interview with the Wall Street Journal this morning that a strong dollar reflects confidence in the U.S. economy, but while it would be good for the economy in the long run, “there are certain issues” with a strong dollar. Mnuchin confirmed that the market will determine the trajectory of the dollar in the short term. His comments have been net-negative for the greenback and the dollar is broadly lower.

Mnuchin’s remarks on relations with Mexico were far more placid than what we’ve heard from many other members of the new administration. The Secretary said he was not concerned with U.S.-Mexico trade relations and there would be no near-term action on that front. This provided further opportunity for the peso which up over a percent against the USD and firmly below the 20.0 mark.

As politics resumes their place in the forefront, it is important to keep the Fed in mind. The minutes for the Fed’s January/February meeting were released yesterday, and while “many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon”, they don’t seem entirely ready to take action quite yet. They expressed great uncertainty over what policy changes we will see from the new administration, noting that an increase in fiscal spending would have increased upside risks, whereas “other policies” could pose potential downside risks to the economy.

Atlanta Fed President Dennis Lockhart mentioned that the U.S. economic picture was solid and that recent data was “pretty supportive” of the Fed’s rate hike plans. While this gives little new information, it confirms that the FOMC is still trying to keep markets prepared for a rate hike.

EURUSD:   Euro gains compounded as rolls back with French politics.

GBPUSD:  Sterling gaining as investors shy away from the dollar.

AUDUSD:  AUD/USD highest level since election night as the USD retreats.

CADUSD:  CAD stronger in the backdrop of a weaker USD.