The strong dollar is not just a function of the weak euro - BBH

Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, argues that the OECD's measure of purchasing power parity estimates the euro to nearly 27% undervalued.  That is significant.  However, the euro was overvalued by from 2004 through most of 2014. Chandler also adds that purchasing power parity is the level currencies gravitate around in the long-run according to economists, not in the short-run and the deviation from fair value can be largely explained in cyclical terms, not manipulation.

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"The G20 finance ministers and central bankers meet at the end of next week. It is the first such meeting for the new US Treasury Secretary Mnuchin, who according to press reports, is struggling to put together his senior team.  Nevertheless, An early draft of the statement has been leaked to the news wires.  There are clear signs that some accommodation is being made to the new US administration."

"The draft statement drops the pledge to resist protectionism.  It still endorses "open and fair" international trade, and reaffirms the commitment to reducing the excessive imbalance. The statement issued last summer called for countries to refrain from competitive devaluations and not use the foreign exchange for competitive purposes.  This is what we have compared with an arms control agreement.  This was dropped in the draft statement, and replaced by "affirming previous foreign exchange commitments."   It may be a shorthand for the draft.  It will be interesting to see how this evolves in future drafts, and of course, in the final statement." 

"Germany argued that under EU rules, the European Commission handles trade policy and the ECB is responsible for currency policy.   There is substantive defense Germany could offer in addition.  The US-German trade balance is improving already.  The rolling 12-month US merchandise deficit bottomed in July 2015 at a monthly average of $6.34 bln.  By January 2017, the 12-month average had fallen by 15% to $5.43 bln. "