Whether you like US President
Donald Trump or not, his tweets will move market like no other newsflow or
development. In fact, his latest comment might just change the direction of US
Federal Reserve.
It might be difficult for many of
us to believe as the logic to raise rates for the US Fed makes sense given the economic
position of the United States as well as the long overdue interest rates hike
in the views of most economists in the world.
But not for Donald Trump. Instead
of press conference, all it took is his tweets.
He bashed the Chinese, EU and
others for manipulating their currencies and interest rates lower even when US
raise rates along with the stronger US dollar.
“China, the European Union and
others have been manipulating their currencies and interest rates lower, while
the US is raising rates while the dollars gets stronger and stronger with each
passing day – taking away our big competitive edge. As usual, not a level
playing field…”
“…The United States should not be penalized
because we are doing so well. Tightening now hurts all that we have done. The
US should be allowed to recapture what was lost due to illegal currency
manipulation and BAD Trade Deals. Debt coming due & we are raising rates –
Really?”
It is almost certain to impact the
US dollar following that comment.
Just look back at his previous tweets
and you’ll believe that tweets have an impact on the market. In April 2017, Trump
says “dollar too strong” and guess what, it fell after that.
He complaint about the oil prices
being too expensive. It fell as Saudi pump in more oil supply into the market.
Perhaps the most remarkable of them
all would be his tweets condemning North Korea’s Kim Jung On, which eventually
lead to a summit with who he used to label as “The Rocket Man”. While there
might not be much coming out from that summit, you can’t deny the fact that there
were less news on the launching of missiles by the North Korean since then.
So, for me, I think it would be crazy
for anyone to rule out a potential trade war or even a possibility of a
reversal of direction for the US Federal Reserve or a slower interest rates
hikes as compared to what was guided.
Don’t forget that he only tone down
on his threats against North Korea after Kim decided to come to the negotiation
table. Will China do that on trade especially if it comes at the risk of losing
face on the international front? And let’s not forget there is also the
European Union.
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