Mixed dollar tone, macro backdrop is benign

Analysts at Brown Brothers Harriman explained that last week we saw a decidedly mixed dollar tone.

Key Quotes:

"The picture has become clearer, the technical tools we use suggest that the dollar-bloc currencies are better positioned than other majors, like the euro, yen, and sterling.

The macro backdrop is benign. That is to say, there is strong enough growth to absorb slack in most of the major economies and without generating the price pressures that central banks would see as requiring a stronger response. A few weeks ago, the market ostensibly bought euros and yen on ideas that central banks are exiting there extraordinary easing More recently there has been speculation that the Fed will suggest four rate hikes instead of three this year when it meets on March 21.

On the trade front, the US bark is proving worse than the bite. Exemptions will be given, as was the case with Bush's 30% steel tariffs. While the risk of a trade war has increased, it's not the most likely scenario. Even with China, the US rhetoric is more bombastic than supported by US actions. The US has asked China to reduce its bilateral trade surplus with the US by a billion dollars, according to a presidential tweet, which is hardly even a rounding error on the more than $370 bln imbalance. Despite the haranguing during the campaign, the Administration has not cited China as a currency manipulator."

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