This Strong Dollar Hurts US Competitiveness

This Strong Dollar Hurts US Competitiveness

$USD

FLASH: President Trump, “I want a strong dollar, but I want a dollar that’s great for our country not a dollar that is so strong that it is prohibitive for us to be dealing with other nations.”

Saturday, President Trump renewed criticism of the Fed and said its tight monetary policy contributes to a strong USD and hurting the United States’ competitiveness.

“We have a gentleman that likes a very strong dollar at the Fed,” President Trump said

The economy a Key part of President Trump’s political platform, and he has repeatedly criticized the Fed and Chairman Jerome Powell for raising interest rates.

The Fed, after raising interest rates 4X last year, signaled that it will be “patient” before tightening monetary policy further, in a nod to rising concerns about the economic outlook amid financial markets volatility, slowing global growth.

“We have a gentleman in the Fed that loves quantitative tightening. We want a strong dollar, but let’s be reasonable. Can you imagine if we left interest rates where they were …. if we did not do quantitative tightening, this would lead to a little bit lower dollar,” President Trump said.

Thus, send a clear message to Mr. Powell, that he wants lower rates, and stimulus, as weaker currency generally makes a country’s exports more competitive.

Of course Mr. Powell says he will not be swayed by political pressure and asserting the Fed’s independence in early January when he said that he would not resign even if President Trump asked him to do so. After he learned of Oval Office talk of being sacked.

The Fed’s benchmark overnight lending rate currently is within a range of 2.25% to 2.50%.

Last week in front of Congress Chairman Powell made a case for a rate hike.

Market watchers were focused on Fed Chair Powell’s semi-annual monetary policy testimony to Congress last week. Most summaries of that testimony highlighted his Dovish-minded position, emphasizing his view that the Fed will take a patient approach with monetary policy and that the Fed is close to agreeing on a plan to end the balance sheet runoff.

Those summaries were on conventional point, yet they all missed an opportunity to highlight the unconventional point that Mr. Powell simultaneously painted a case for the next rate hike, leading to a stronger USD.

So President Trump sent him a message back, No rate hikes, rate reductions.

Have a terrific week

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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