According to Piotr Matys, EM FX Strategist at Rabobank, while comments from President Trump about the Fed have caused a lot of stir, it’s not the first time he criticised Governor Powell for raising interest rates.
Key Quotes
“To recall, back in July Trump complained that “I don’t like all of this work that we’re putting into the economy and then I see rates going up.” On July 20 the dollar posted one of its biggest falls so far this year. This proved short-lived as at the beginning of August the DXY Index resumed its upside traction rallying to a new year-to-date high.”
“We are witnessing a very similar market reaction on this occasion as well as the DXY Index plunged overnight. However, we are not convinced that President Trump will be able to talk down the USD in a sustainable way by applying political pressure on the Fed not to hike rates.”
“Essentially, the pullback in USD/CEEMEAs triggered by President Trump’s critical remarks about the Fed is unlikely to last in our view.”
“Apart from the prospect of more hikes in the US, the bullish bias in USD/CEEMEAs is also underpinned by trade conflict between the US and China.”
“If Trump can’t force the Fed to stop raising rates (at least for now) and he has no intentions to ease trade pressure on China, the path of the least resistance is likely remain skewed to the upside for USD/CEEMEAS in the coming weeks/months.”
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