Trump picks an easy target
Morning mid-market rates – The majors
August 21st: Highlights
- Criticizes Powell for rate hikes
- Sterling awaits Brexit news
- Euro continues slow rally
Trump betrays his lack of economic savvy
Trump commented that he is “not thrilled” by the hikes despite the policies he has put in place creating an inflationary macroeconomic environment. It is likely that as the effect of tax cuts lessens, the need for rate hikes will lessen through 2019. The Turkish lira remains volatile as traders await the next move from the U.S.
Trump is highly unlikely to have any lasting effect on Fed Policy and the Chairman has made several speeches already in his term commenting on the need for Central Bank independence.
The dollar fell a little in reaction but also due to the news that China and the U.S are going to sit down and discuss trade differences. This encouraged a marginal rise in global risk appetite which often signals a weaker dollar.
The dollar index fell for the fourth consecutive day reaching a low of 95.44 and coming close to threatening what has now become support at 95.25.
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Sterling lost without Brexit
It started the week on a run of six consecutive “down” weeks. This week started brightly, rising against a weaker dollar to a high of 1.2801 and has continued to climb overnight, reaching a high (0600 BST) of 1.2830
Brussels is apparently set to reject the latest set of proposals which emerged from the recent Chequers meeting. The solution suggested for the question of the Irish border is now considered unworkable.
So far, Brussels has not acknowledged to any degree the possible impact on mainland Europe of no deal apart from the issuance of several communiques which allude to the budget and trading in accordance with WTO regulations. Very soon Dublin is likely to realize it has overplayed its hand since no deal would be an undoubted catastrophe for the Irish economy.
Euro climbs against weaker dollar
Yesterday it rose versus the dollar for the sixth time in the past seven sessions, reaching 1.1485 and continuing in Asia reaching 1.1530.
Fresh losses by the Turkish Lira have had little new effect upon the single currency as the risk of contagion subsides.
Greece emerged from its third and last bailout yesterday and it’s Prime Minister had some damning words for the euro commenting that it is unsustainable in its current form. These sentiments have been backed up by the new Italian Government which is calling for reform of the currency.
While the euro rises versus the dollar, it is also making significant inroads versus the pound. Yesterday, it reached 1.1127 and looks set on a path to break 1.1000 which equates to one euro equalling just below ninety-one pence.
There are no significant data releases the week which leaves traders free to consider last week’s mixed bag.
Have a great day!
About Alan Hill
Alan has been involved in the FX market for more than 25 years and brings a wealth of experience to his content. His knowledge has been gained while trading through some of the most volatile periods of recent history. His commentary relies on an understanding of past events and how they will affect future market performance.”