Trump pushes for a lower US dollar
Published on 22.08.2018 18:18

The US dollar may feel the pressure of political interference after comments by US president Donald Trump directed towards the US Federal Reserve.

Trump noted in an interview that he was "not thrilled" by US Fed President Jeremy Powell’s decision to raise interest rates and would keep complaining about the matter if rates were to move higher

"We're negotiating very powerfully and strongly with other nations," Trump said. "We're going to win, but during this period of time I should be given some help by the Fed. The other countries are accommodated."

Many Analysts say Trump’s words set a dangerous precedence as it implies he is prepared to pit pressure on the US Federal Reserve when he doesn’t like something which may lead to the central bank loosing it’s independence and be driven by political moves.

The US dollar has risen sharply for the last month against most of the major currencies which has led to some complications in the US economy, namely the export sector where a rising greenback is starting to make some goods expensive.

Trump’s rhetoric may be aimed at bringing down the level of the US dollar and especially since there are elections just around the corner.

Some say the ploy may work in the short term, but in the end the underlying economical factors are still strong for the US dollar and it will eventually rebound.

"Trump’s not thrilled with the Fed raising rates. At the same time, he accused China and the EU of currency manipulation. Taken together with previous comments, we see a clear pattern of the president willing to talk the USD lower whenever it starts to look a bit toppy” said Neil Wilson, the chief market analyst at Capital.com

"Two ways to look at this, one, if done enough times it can exert a powerful influence over market expectations. Two, comments like these will produce diminishing returns for the president. I think on this one the market will come round again and the dollar bounces back, but nonetheless, it does appear the market is worried that the president will exert influence on Fed policy." He added.

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Andrew Masters

Analyst

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