Good morning, and welcome to our ongoing coverage of the world economy, the financial markets, the eurozone and the economy.
Throwing out a respected Central Bank and replacing it with its own, should guarantee the newcomer a light ride, they would have thought. But in these days we live in Trump world, and Jerome Powell, the election of the President, the Federal Reserve as a replacement for Janet Yellen chair, got it in the neck from the White house on Monday.
The Fed has raised interest rates and is expected to continue this year. But President Trump told Reuters on Monday:
I’m not excited about his rate hike, no, I’m not excited.
We are very powerful and strongly negotiating with other Nations [on trade]. We’re gonna win. But during this time I should be given some help from the Fed. The other countries are accommodated.
Not what Powell wants to hear before the key bankers meeting in Jackson Hole this week. And Trumps intervention puts the Fed in a difficult position. Jasper Lawler, head of research at London Capital Group, said:
Trump could later sow the seed for market perception problems. For example, the stronger dollar should lead to weaker economic data moving towards December and the Fed decides not to rise. The market might wonder if the Fed did not choose to rise on the basis of data or to appease trump? Thus, while Trump will not affect the path of interest rate hikes, his comments could affect the perception of the market from what is happening, which is an equally dangerous game to play.
Trump also uses the Reuters interview to take another blow to China – and for a good measure Europe-for allegedly manipulating their currencies.
And ahead of the meeting this week between U.S. and Chinese officials to discuss the current trade dispute, Trump said he did not expect much progress from the talks, which is not what the markets want to hear.
Nevertheless, if the President wants a weaker U.S. currency, he got his wish. The dollar slips back, with the pound currently by 0.37% to $1.2841 and the euro by 0.5% better.
On a relatively quiet day, there could be good news for British Chancellor Philip Hammond before his autumn budget.
The United Kingdom is expected to have its largest budget surplus for 17 years in July, shifting from a deficit of £5.4 billion last month to a surplus of£ 1.1 billion, supported by increased corporate tax payments.