Still in London as this part of the business trip is winding down. I had the privilege of going over to the Bloomberg office today and spoke with Vonnie Quinn and Mark Burton about the euro’s outlook and whether the US should have a strong or weak dollar.
I sketch out my idea that the (upside) correction in the euro began in mid-December around following the Fed’s hike. Over the last couple weeks, I have been discussing in my posts the idea that the dollar has been carving out a bottom, and the euro now is off almost two cents from last week’s highs. The turn may have already happened.
Vonnie asked me about what I have called the $16 trillion question: Whether it is better for the US to have a strong or weak dollar? In the previous post I discuss this, so my answer was a confident yes. I explain what I meant was that given the circumstances and the recent history, the US is best off setting the standard for others, and according to agreements at the G7 and G20, by accepting the level that is determined by the market.
A key outcome of this is that it is a form of arms control. Major countries have agreed not to seek trade or financial advantage by having a foreign exchange target. Countries are still free to pursue the monetary and fiscal polices to address domestic economic consideration.
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