The World Economic Forum in Davos continues to be a divisive event: A meeting of the rich and powerful, discussing economic challenges that effect the global populace en masse with little to no input from the people this would affect.

So the appearance of the America First, blue-collar championed Republican President Trump sits slightly at odds with his pledge to ‘drain the swamp’. However, as the first sitting President since Bill Clinton in 2000 to address the event, his attendance was always set to be the headline event. And even the prelude to his speech this afternoon has been setting the tone.

Before Air Force One had left Andrews Air Force Base, Trump’s Treasury Secretary Mnuchin was fanning the winds that had already blown the US dollar to 3-year lows. “A weaker dollar is good for us…”, he remarked to reporters on his arrival at the Swiss ski resort, with this statement overshadowing his longer-term views on the greenback.

These few words were taken as an endorsement that the administration is happy to see the greenback fall, and perhaps even hinted they’d be comfortable, even wanted, to see it fall even further.

Less than 24 hours later, however, and he received an emphatic rebuke from his boss, the President: “Ultimately, I want to see a strong dollar,” Trump declared, sending the dollar index almost 1% higher in the hour after his statement, reiterating that Mnuchin’s statement had been misinterpreted.

The positive impact Trump’s statement has had the dollar, however, has almost been fully reversed, begging the question whether investors are repositioning themselves ahead of this afternoon’s speech from the ever-unpredictable President.

And the Stateside war of words hasn’t gone unnoticed and unpunished by more experienced macroeconomic orators. When asked yesterday at his monetary policy press conference, ECB head Mario Draghi took aim at his Goldman Sachs almunus, noting Mnuchin’s intervention in currency markets doesn’t reflect agreed terms of reference, and even reflected concerns of its impact on international relations.

Trump has already extended a debate that should have been put to bed with a simple dismissal of sentiment. However, in his haste to correct (read ‘undermine’) his Treasury Secretary, the President has inadvertently done much more: Talking the dollar up or down has now become the key takeaway from Davos.

Expect this theme to continue into the close of the event, and perhaps continue the debate into the days and weeks to come.

Henry Croft, Research Analyst, 16 January 2018