I wrote a few weeks ago about how President Trump wants a weaker Dollar, and how he waits for moments of technical weakness in the greenback before he aims a few well-chosen words which attempt to incite the market into selling the Dollar. He’s done it again, except this time in an interview with old-media Reuters and not via Twitter, his usual “bully pulpit”.
I think the President is being well-advised at least regarding the timing of his interventions, by a good technical analyst. Last time he spoke up, the Dollar Index was repeatedly failing at major resistance. This time, the Dollar Index just made a bearish weekly pin candlestick at another major resistance level.
If you don’t have time to read the full interview, the key quotes were Trump saying he was “not thrilled” with the Federal Reserve raising interest rates. He said that other countries, referring to major economic competitors of the U.S. such as China, were helped by accommodative central banks which manipulate exchange rates in favorable directions (I’m paraphrasing here).
The U.S. Federal Reserve is independent, and President Trump has no real leverage over it, as he only recently appointed the new Chair, Jerome Powell, who has a lot of time on the clock to run out before he will be replaced.
The U.S. Federal Reserve is expected to make two further rate hikes this year, in September and December, of 25 basis points each.
I find it hard to see what the President really expects to achieve here. I don’t see what leverage he has which can prevent the Federal Reserve from making these hikes as planned. I think all he is trying to do is push the Dollar down in the market whenever he sees a critical weak spot and the beginning of a potential bearish reversal.