US President Donald Trump continues to criticize the central bank saying that he is “not thrilled” that the bank is in rate hike mode. The Federal Reserve has not hiked twice in 2018, and market participants expect one, perhaps two hikes in 2018. Some suggest that the comments were trying to influence the dollar, of course raising eyebrows. In addition to the comments that pressure the Fed, the President called both China and the EU currency manipulators, again putting downward pressure on the US dollar. In the short-term, the President is achieving his goal.
The US dollar versus Yen has dropped from the 112.00 level to 110.42 (last traded price), on Tuesday, as the President stated that he was disappointed with the recent Fed actions. Of course, Mr Trump wants a slower rate hike cycle. Also, note that the US dollar long positions were at record levels recently and many funds were, as a result, forced to cut their longs – they are forced sellers.
The anti-strong dollar view will likely continue from the White House, especially with high expectations of a rate hike in September.
It it highly unusual for the President of the United States to express strong views on currency issues, as he or she is supposed to be a bystander and not an active participant in traded markets. The President has made comments over the summer regarding the US dollar, manipulators, and disappointment that the Fed is not supporting his growth agenda regarding the economy.
Year to date, the dollar is slightly stronger by 3.7 percent for the year, versus a basket of currencies. However, it dropped 0.4 percent since comments began flowing from the Oval Office.