A Wide-Ranging Trump Interview Depresses the Dollar

August 21, 2018

In an exclusive interview with Reuters, President Trump criticized Fed Policy as insufficiently accommodative and having an unconstructive influence on ongoing trade talks. Regarding Fed Chairman Powell, whom he appointed previously to replace Janet Yellen, he answered his own rhetorical question: ” Am I happy with my choice? I’ll let you know in four years” when her term ends. Trump redefined central bank independence: “I believe in the Fed doing what’s good for the country,” and who better than potus to know what that is. On other matters, Trump asserted no concessions would be made with Turkey, warned that doing an interview with the Mueller investigation could be a “perjury trap,” called the Chinese and Europeans currency manipulators, expressed doubt that appropriate progress will come out of the latest trade talks with China, and took credit for defusing the dangerous Korean situation.

The dollar is mostly lower today, with drops overnight of 0.6% against sterling, 0.5% versus the South African rand, 0.4% relative to the Swiss franc, 0.3% vis-a-vis the euro, Aussie dollar and kiwi, and 0.2% against the yuan, loonie, and Mexican peso. Two exceptions to the downward trend have been rises of 0.4% against the yen and 1.0% versus the Turkish lira.

Ten-year sovereign debt yields climbed 4 basis points in the U.K. and 3 bps each in the U.S. and Germany. When politicians dismiss the sanctity of central bank independence, expected inflation is lifted, and that’s destabilizing to long-term interest rates.

Commodities, on the other hand, were buoyed by the president’s remarks with oil and copper rising 1.0% and gold some 0.4% stronger.

Minutes from this month’s earlier Reserve Bank of Australia policy review imply that the next change of the official cash rate is likely to be upward but not very soon in spite of likely job growth the rest of this year at an above-trend pace. Hungary’s central bank is holding a policy review.

Dutch consumer confidence fell to a 19-month low in August.

The Swiss CHF 1.154 billion trade surplus in July was the smallest surplus since January. The year-to-date surplus if CHF 9.01 billion 41% narrower than a year earlier. Swiss M3 money growth in July of 2.4% on year matched the June result.

The Confederation of British Industries’ industrial trends survey index for orders fell to a 3-month low of +7 in August after readings of +11 in July and +13 in June. The British government’s public sector surplus in July of GBP 2.872 billion was larger than forecast and indeed the biggest July surplus since 2000. Public sector debt of 84.3% was down from an 86.0% outstanding level a year earlier.

The Portuguese first-half current account deficit of EUR 2.411 billion was 53% wider than that during the first half of 2017.

South Korean PPI inflation accelerated 0.3 percentage points to 2.9% in July. Hong Kong CPI inflation in July of 2.4% matched June’s result, which was the highest since March.

Japanese department store sales swung back into the red (down 6.1% on year in July) after a 3.1% rise recorded in June. But supermarket sales posted a 1.5% on-year rise versus 0.1% in June and a drop of 2.3% in the year to May. Finally, on-year growth in machine tool orders in July was revised upward by 0.1 percentage point to 13.1%. While above June’s 11.4% advance such was lower than the results earlier in 2018 including a 48.3% January-over-January increase.

South Africa’s index of leading economic indicators in June was 1.1% higher than a year earlier. That’s the best on-year result since February.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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