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10 Apr 2015
Does the US Treasury see trouble ahead? – BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, comments on the US treasury’s semi-annual report on International Economic and Exchange Rate Policies, and further notes that the report expresses concern over the impact of imbalanced mix of macro-economic policies on global outcomes.
Key Quotes
“As we have all come to expect now, the report does not cite any country as a currency manipulator and therefore contains no major surprise.”
“However, the overview section highlights “concern over the impact that an imbalanced mix of macro-economic policies is having on global outcomes”.”
“The US Treasury is critical of countries that rely on “a single lever of policy” (monetary policy?) and in a dig at Germany adds that fiscal stimulus should be used where “fiscal space exists” in order to complement monetary policy.”
“It is clear that the US Treasury report reveals concern about the over-reliance of monetary policy with Germany not doing enough fiscally to augment growth and structural reforms being implemented too slowly.”
“Japan is criticised for not offsetting the hit to demand from the sales tax increase. The root of these concerns must lie in concerns over what this might mean for the US dollar going forward. We have already had the fastest gain for the dollar since 1980-81 and with no change on the horizon, further gains look likely.”
“If the euro-zone and Japan rely on monetary policy without fiscal support or reform, weak growth continues and market participants see the policy divergence extended further and further into the future.”
“This report certainly points to deepening concern within the Obama administration over the potential for the dollar to extend further to such a degree that it starts to undermine the US recovery currently in place.”
Key Quotes
“As we have all come to expect now, the report does not cite any country as a currency manipulator and therefore contains no major surprise.”
“However, the overview section highlights “concern over the impact that an imbalanced mix of macro-economic policies is having on global outcomes”.”
“The US Treasury is critical of countries that rely on “a single lever of policy” (monetary policy?) and in a dig at Germany adds that fiscal stimulus should be used where “fiscal space exists” in order to complement monetary policy.”
“It is clear that the US Treasury report reveals concern about the over-reliance of monetary policy with Germany not doing enough fiscally to augment growth and structural reforms being implemented too slowly.”
“Japan is criticised for not offsetting the hit to demand from the sales tax increase. The root of these concerns must lie in concerns over what this might mean for the US dollar going forward. We have already had the fastest gain for the dollar since 1980-81 and with no change on the horizon, further gains look likely.”
“If the euro-zone and Japan rely on monetary policy without fiscal support or reform, weak growth continues and market participants see the policy divergence extended further and further into the future.”
“This report certainly points to deepening concern within the Obama administration over the potential for the dollar to extend further to such a degree that it starts to undermine the US recovery currently in place.”