This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/live/2018/jul/20/trump-fed-criticism-currency-war-fears-yuan-uk-public-finances-business-live
The article has changed 16 times. There is an RSS feed of changes available.
| Version 0 | Version 1 |
|---|---|
| Trump fuels currency war fears with Federal Reserve criticism – business live | Trump fuels currency war fears with Federal Reserve criticism – business live |
| (35 minutes later) | |
| President Trump has set “more cats among even more pigeons” with his comments about interest rates and the dollar yesterday. | |
| So says Kit Juckes, foreign exchange expert at French bank Société Générale. | |
| Juckes doesn’t believe the Federal Reserve’s independence is now in doubt. | |
| And as long as [Fed chair] Jay Powell & Co respond to a strong economy and easy fiscal policy with measured policy tightening, they aren’t going to send bond yields or the dollar down on their own. | |
| However, he also expects more fireworks if China allows its currency to keep sliding: | |
| As long as the renminbi is falling in an orderly manner, there is little urgency for the Chinese authorities to counter it. | |
| Whether or not China is wittingly undertaking a depreciation policy, the question will increasingly be on investors’ minds as the slide deepens. And the Trump Administration is unlikely to keep quiet for long either | |
| The Trump administration is determined to push down their currency, says Neil Wilson of Markets.com. | |
| A cheaper dollar would help US companies compete abroad, a key plank of Trump’s attempt to make trade ‘fairer’. | |
| Wilson writes: | |
| A clear pattern is emerging – Donald Trump wants a weaker dollar. Prior to his inauguration he said the dollar was ‘too strong’. Then earlier this year Treasury secretary Mnuchin echoed those comments when he openly questioned the strong dollar policy. | |
| The Mnuchin effect lasted until the middle of April, but since then the dollar has been on the rise again, with the dollar index hitting 95, a level not seen since November last year. | |
| When you look at the trade policies he’s pursuing, a weaker dollar makes sense. The only problem is that an all-out trade war, by making dollars scarcer, will force up the greenback against its peers. | |
| Trump’s intervention raises the dangers of a full-blown currency war, says Jasper Lawler of London Capital Group. | Trump’s intervention raises the dangers of a full-blown currency war, says Jasper Lawler of London Capital Group. |
| He says China’s response - letting the yuan weaken sharply - is significant. | He says China’s response - letting the yuan weaken sharply - is significant. |
| As Trump moaned about the strength of the dollar, the PBOC devalued the yuan by the most since 2016, sending a chill through the markets. | As Trump moaned about the strength of the dollar, the PBOC devalued the yuan by the most since 2016, sending a chill through the markets. |
| Interpreted as China’s response to the US trade war – the starting of a currency war- risk off is prevailing with traders selling out of equities sending Asian markets and European futures sharply lower. It was only a month ago when China denied that they would start a currency war following Trump’s action. A lot can change in a month under Trump. | Interpreted as China’s response to the US trade war – the starting of a currency war- risk off is prevailing with traders selling out of equities sending Asian markets and European futures sharply lower. It was only a month ago when China denied that they would start a currency war following Trump’s action. A lot can change in a month under Trump. |
| Donald Trump’s criticism of the Fed came after the US dollar hit a one-year high against a basket of other major currencies. | Donald Trump’s criticism of the Fed came after the US dollar hit a one-year high against a basket of other major currencies. |
| The dollar has strengthened thanks to several US interest rate rises, and the prospect of more to come. | The dollar has strengthened thanks to several US interest rate rises, and the prospect of more to come. |
| US interest rates are now 2% - up from just 0.25% after the financial crisis - with the Fed likely to push through two more quarter-point increases this year. | US interest rates are now 2% - up from just 0.25% after the financial crisis - with the Fed likely to push through two more quarter-point increases this year. |
| In contrast, eurozone interest rates are zero, while the UK Bank Rate is just 0.5%. | In contrast, eurozone interest rates are zero, while the UK Bank Rate is just 0.5%. |
| Trump singled out China for particular criticism last night, saying it was letting the yuan drop “like a rock”. | Trump singled out China for particular criticism last night, saying it was letting the yuan drop “like a rock”. |
| So he won’t be pleased by Beijing’s response – the People’s Bank of China let the yuan hit a new one-year low today, fixing the currency at 6.7671 per dollar. | So he won’t be pleased by Beijing’s response – the People’s Bank of China let the yuan hit a new one-year low today, fixing the currency at 6.7671 per dollar. |
| That’s nearly 1% weaker than Thursday’s fix. | That’s nearly 1% weaker than Thursday’s fix. |
| The yuan then tumbled lower in nervous trading, hitting 6.812 to the dollar. That prompted a reaction; Chinese banks began buying the yuan and selling dollars, apparently in an attempt to prop the currency up. | The yuan then tumbled lower in nervous trading, hitting 6.812 to the dollar. That prompted a reaction; Chinese banks began buying the yuan and selling dollars, apparently in an attempt to prop the currency up. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| With trade war fears mounting and Brexit looming, investors already have plenty to worry about. But Donald Trump has added a new anxiety -- currency wars. | With trade war fears mounting and Brexit looming, investors already have plenty to worry about. But Donald Trump has added a new anxiety -- currency wars. |
| Overnight, the US president launched a rare attack on America’s central bankers, revealing that he wasn’t happy with their plans to raise US interest rates. | Overnight, the US president launched a rare attack on America’s central bankers, revealing that he wasn’t happy with their plans to raise US interest rates. |
| Trump claimed that the Federal Reserve risked undermining all his good work strengthening the economy. He told CNBC that higher borrowing costs would drive up the dollar, especially as other central banks are keeping policy loose. | Trump claimed that the Federal Reserve risked undermining all his good work strengthening the economy. He told CNBC that higher borrowing costs would drive up the dollar, especially as other central banks are keeping policy loose. |
| “I don’t really — I am not happy about it.” | “I don’t really — I am not happy about it.” |
| “I don’t like all of this work that we’re putting into the economy and then I see rates going up.” | “I don’t like all of this work that we’re putting into the economy and then I see rates going up.” |
| You could almost hear Fed chair Jerome Powell’s eyebrows rising sharply as Trump’s comments hit the wires. Central bank independence is a serious issue - policymakers are meant to navigate the economic squalls and storms free from political interference. | You could almost hear Fed chair Jerome Powell’s eyebrows rising sharply as Trump’s comments hit the wires. Central bank independence is a serious issue - policymakers are meant to navigate the economic squalls and storms free from political interference. |
| But Trump clearly doesn’t play by the rules, so traders now have to calculate whether White House pressure is going to influence the path of interest rates. And if so, is that going to set off a currency war? | But Trump clearly doesn’t play by the rules, so traders now have to calculate whether White House pressure is going to influence the path of interest rates. And if so, is that going to set off a currency war? |
| Powell may feel Trump’s criticism is particularly misplaced, as the president’s tax-cutting agenda is putting pressure on the Fed to act, to prevent a dangerous inflationary bubble. | Powell may feel Trump’s criticism is particularly misplaced, as the president’s tax-cutting agenda is putting pressure on the Fed to act, to prevent a dangerous inflationary bubble. |
| Trump insisted that Powell was a “very good man”, but even so the president “wasn’t thrilled” about the prospect of further interest rate hikes. | Trump insisted that Powell was a “very good man”, but even so the president “wasn’t thrilled” about the prospect of further interest rate hikes. |
| The White House tried to row back on Trump’s comments, insisting that he respected the independence of the Fed. But still, his intervention hit the markets, as CNBC explains: | The White House tried to row back on Trump’s comments, insisting that he respected the independence of the Fed. But still, his intervention hit the markets, as CNBC explains: |
| Financial markets across the globe whipsawed on Trump’s comments. | Financial markets across the globe whipsawed on Trump’s comments. |
| The dollar index, which tracks the dollar’s performance against a basket of six other currencies, fell from a one-year high and traded just below breakeven. U.S. equities edged off their session lows, but remained lower on the day. | The dollar index, which tracks the dollar’s performance against a basket of six other currencies, fell from a one-year high and traded just below breakeven. U.S. equities edged off their session lows, but remained lower on the day. |
| Also coming up today | Also coming up today |
| June’s UK public finances are released this morning. The City predicts that Britain borrowed around £5bn to balance the books last month, much the same as in May. | June’s UK public finances are released this morning. The City predicts that Britain borrowed around £5bn to balance the books last month, much the same as in May. |
| 9.30am BST: UK public finances for June | 9.30am BST: UK public finances for June |
| 1.30pm BST: Canadian inflation figures | 1.30pm BST: Canadian inflation figures |