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According to Sean Callow, analyst at Westpac, the value of the US dollar remains a sore point for President Trump, weeks after he sounded out his economic team over the possibility of intervention to weaken it.

Key Quotes

“This week he reported its value as the highest in US history. We hear many claims of superlatives from the White House, but in this case, it is not far off the mark, though only in nominal terms.”

“We agree with Trump’s basic point that the US dollar is very strong, while noting that this is fully consistent with the US economy’s outperformance of most of its major trading partners over the past 5 years, resulting in higher interest rates. This is of course the even hotter topic for Trump ahead of the Kansas City Fed’s annual symposium at Jackson Hole, Wyoming.”

“The dollar and US yields bounced a little this week on the minutes of the FOMC’s end-July meeting, which reported that “most” members viewed the 25bp rate cut as a “recalibration”, a “midcycle adjustment.” Of course a key reason for that rate cut was the US-China trade war and the very next day Trump announced 10% tariffs on around $300bn of Chinese imports, sparking a slide in global equities and more aggressive pricing for Fed easing.”

“So much is at stake as Fed chair Powell takes the podium on Friday. Increased concern over the global economy would be consistent with Westpac’s call for -75bp in cuts by year-end.”