Trump’s critique of the new Fed, but can it really bring down the Dollar?

By David Wagner

Investing.com – once again, the us president, Donald Trump has criticized the Fed in a tweet published last night.

“Economically, our country is doing very well, number one, in spite of the policy obsolete of the Fed in terms of tightening interest rates,” said Trump.

To the extent that the Fed has pretty clearly announced its intention to lower rates at its next meeting the end of the month of July last week with a dovish Powell before Congress US, one might think that in thus insisting, the president, Trump calls for the central bank, the US doesn’t end there, and goes even further in its rate cuts.

And given the fact that the US president also noted that the economy is doing very well, it is easy to guess that in the end, its aim is especially to bring down the Dollar, to increase the export competitiveness of US.

In other words, the trade war could be double, or mix with a currency war, once more under the leadership of Donald Trump.

Last week, Goldman Sachs (NYSE:GS) noted, moreover, that according to it, the risk of an intervention directly on the Forex of the United States to lower the Dollar goes up.

However, it seems actually possible that it comes to that, since the Fed’s action is unlikely to impact significantly to the decline in the Dollar, given that the market is already 100% sure that a rate cut will take place on 31 July.

For the Fed significantly affects the Dollar, it would surprise rate cut of 0.50% and not 0.25% at the end of the month, and/or that it indicates from the outset clear that further rate cuts will take place before the end of the year.

And it remains unlikely at this stage : indeed, if the Fed relaxed its monetary policy significantly, while the economy is strong, it will have more room for manoeuvre if the economy were to deteriorate significantly with the threat of an impending recession.

In the contrary case, the risk of seeing Donald Trump to make more and more pressure for action from the US Treasury to drop the Dollar will increase, which empêchere probably not the US president to also continue to criticize thoroughly the Fed…

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