Selling Pressure: Dollar suffers after Trump’s comments

Ann Santiago
August 22, 2018

The U.S. dollar dropped and Treasuries edged lower on Tuesday after President Donald Trump criticized Federal Reserve interest-rate hikes.

"Most Fed-watchers are of the view that Powell is emphasising the need for financial stability and with a positive United States economic backdrop is obliged to tighten policy".

American presidents have rarely criticized the Fed in recent decades because its independence has been seen as important for economic stability.

The president spooked investors in July when he criticized the US central bank over tightening monetary policy. As against previous times, the metal has failed to lure investors as the safe haven in global world even amid heightened trade war fears largely on the back of increasing interest rate regime wherein investors now prefer to invest in high yielding USA bonds instead of the metal.

In a confirmation hearing previous year, shortly after Mr. Trump nominated him to the position, he told senators he expected the Fed to continue raising interest rates in the near term.

U.S. President Donald Trump leaves the Rose Garden with Jerome Powell, his nominee to become chairman of the U.S. Federal Reserve at the White House in Washington, U.S., November 2, 2017.

Kaplan's comments, though they did not directly address Trump's remarks, underscore the Fed's view that raising rates, as Kaplan put it, "will give us the best chance of managing against imbalances and further extending the current economic expansion in the U.S".

"We're negotiating very powerfully and strongly with other nations".

"I take comfort from Trump's nominations so far", said James McCann, senior global economist for Aberdeen Standard Investments.

Wall Street analysts near universally expect the Fed will raise rates at its next meeting at the end of September.

Most policymakers believe the Fed can not raise rates much beyond 2.9 percent, a level they see as "neutral" for the economy, without borrowing costs really beginning to drag on growth.

"However he just wants the headline figures. he wants the stockmarket to rise but at the same time he's accusing the European Union and China of manipulating their currencies".

He also said he believed the euro was being manipulated.

Corker said, based on his discussions with Powell last week, "I'm certain they're going to continue to be independent and do whatever they feel is appropriate". "And I'll still win". China's central bank strengthened the yuan's reference rate for a fourth day.

These increases, Trump has told advisers, could harm economic growth, making it more expensive for companies and homeowners to borrow money.

The benchmark USA interest rate, which plays a large role in setting borrowing costs for mortgages, credit cards, small business and auto loans, was set at a range of 0.5 per cent to 0.75 per cent when Trump was sworn in.

Year-on-year earnings growth in the expected to be around 24 percent this year.

Trump has made reducing U.S. trade deficits a priority and the combination of rising interest rates and a strengthening dollar pose risks for export growth. A Fed spokeswoman declined to comment on Monday afternoon. Now only three seats are filled. The president does choose members of the policy-setting Fed Board, and in addition to Powell, he has appointed one Fed governor and nominated three others.

Asked by Reuters whether he believes in the independence of the Fed, the president said, "I believe in the Fed doing what's good for the country".

"I am not happy about it".

Mr. Trump's comments about Mr. Powell were first reported by Bloomberg. "You know, a lot of people beat up on the Fed".

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