The Central Bank doesn’t create problems, it chooses to deal with them
Forex reacts to the exchange of courtesies between Donald Trump and Jerome Powell
Investors are so much accustomed to the market’s inadequate reaction to political or economic events that they start searching for a catch as soon as currencies start moving in the way they are supposed to. On the threshold of September’s FEDeral funds rate hike, they said that the monetary policy normalization factor had been already considered in the USD pairs and that FED’s failure to provide any new information would trigger another wave of USD selling. Things turned out to be simpler: the USD index grew with the rate hike. The Central Bank did a good deed: two people were trying to catch the train and it let the dog out so that they could do it.
While the electorate was following FOMC’s forecasts, trying to see any hints of the regulator’s future actions in Jerome Powell’s statement, the exchange of courtesies between the FED Chairman and the US president remained behind the scenes. The former noted that trade wars had had no impact on the economy yet. The latter said that the interest rate hike would allow the Americans to earn more from their savings. Well Donald, don’t stop and disgrace yourself to the fullest. His words about important success of the current administration, about the growth rate of GDP that exceeded the jobless rate for the first time in 100 years, about raising the rates against a backdrop of economic growth made us smile and put us in good spirits. The statements about the savings can be referred to the same category. Never mind that a person that saves money spends less and thus reduces GDP potential growth. However, the US economic state isn’t so bad that women marry only for love.
Well, let’s admit it is a hard time for Trump. While some people are renowned for finding a way out of whatever difficult situation, he’s famous for finding the entrance. The story with duties on Chinese goods was to cut the negative balance of US foreign trade, but in fact this factor continues growing. The words about the US administration’s success are confirmed with the GDP growth, but let’s be honest: if the republican had assumed power right after the crisis, could we expect the same results now? Today’s economic power of the USA is the result of laborious work of the predecessors, and appropriating their services is a sign of bad manners. To say the least. However, the lack of good manners is nowadays balanced with the absence of hang-ups.
Against a backdrop of Donald Trump praising himself to the skies, FED and its Chairman that logically normalize the monetary policy look like an example to follow. Yes, Jerome Powell was first judged how nice, but then he’ll be judged how wise. He’s been already beaten and he’ll probably be again, but we need to admit that he’s been doing great work. And he doesn’t pride himself on having brought the US economy to prosperity with the current FOMC members and himself at the head. However, the Americans are the only ones to blame. If their country is governed by a donkey, then whom does the donkey govern?
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