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The Donald is at it again! In a speech during a fundraiser, the POTUS reiterated that he’s not pleased with dollar strength and the Fed’s rate hikes.

  • FOMC member Bostic: Fed independence is extremely important
  • Bostic: Sees one more rate hike this year
  • Bostic: Trade policy a source of economic uncertainty
  • U.S. President Trump: “Not thrilled” about Fed rate hikes
  • Trump: “I should be given more help by the Fed”
  • Trump: China and Europe are manipulating their currencies
  • ECB’s Weidmann and BOC’s Wilkins refrain from making policy comments
  • RBA Governor Lowe: Likely that next move in rates will be up improvements continue
  • New Zealand visitor arrivals up 0.6% vs. previous 3.6% drop

Major Events/Reports:

Mixed signals from Bostic

FOMC voting member Raphael Bostic had a speech at the Johnson City Chamber of Commerce in Tennessee. Initially, he sounded optimistic about economic prospects as he acknowledged that growth is strong and unemployment is low.

Bostic also cited that the U.S. economy no longer needs as much stimulus as it used to and that the Fed is trying to get back to neutral stance. However, he did warn that there are risks stemming from emerging nations like Venezuela and Turkey. He also added that trade policy is also bringing uncertainty for businesses.

With that, Bostic mentioned that he favors one more interest rate hike this year for a total of just three hikes in 2018. He noted that the central bank plans to keep balance sheet unwinding in the background and that they’re worried about the flatness of the yield curve.

Trump slams Fed again

In his speech during a fundraising event at the Hamptons, U.S. President Trump took the opportunity to express how he’s “not thrilled” about dollar strength and the Fed’s tightening moves.

These remarks aren’t exactly new since he previously shared his thoughts on how the Fed’s hikes are undoing the progress his administration made in fiscal reform. This time, the POTUS sounded disappointed that his appointed Fed Chairperson Powell didn’t favor “cheap money” as he expected.

In an interview with Reuters later on, Trump also pointed out that other countries get help from their own central banks when pursuing trade negotiations. He said:

“We’re negotiating very powerfully and strongly with other nations. 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.”

On the subject of trade, Trump also accused China and Europe of manipulating their currencies. Still, he did acknowledge that the Fed is doing “what’s good for the country” but that he can say if he’s happy about his pick for Fed head “in seven years.”

Risk appetite extends its stay

Stocks and commodities had a positive run in the earlier session and carried on with their gains for the rest of the day. Investors are likely looking forward to positive developments as U.S. and China prep for trade talks this week.

  • Dow 30 index is up 89.37 points to 25,758.89 (+0.35%)
  • S&P 500 index is up 6.92 points to 2,857.05 (+0.24%)
  • Nasdaq is up 4.68 points to 7,821.01 (+0.06%)

Gold also took advantage of the drop in the dollar to recoup some of last week’s losses while crude oil edged higher.

  • Gold is up to $1,190.55 per troy ounce (+0.46%)
  • WTI crude oil is up to $66.62 per barrel (+1.08%)

U.S. bond yields ticked down on doubts that the Fed could go for two more hikes for the remainder of the year.

Major Market Mover(s):

USD

The dollar was already off to a weak start as Bostic didn’t completely shed his dovish feathers yet. The selling accelerated when Trump grabbed the mic, as this led market watchers to question whether the Fed can maintain its independence or be pressured into taking things slow.

USD/JPY fell from 110.62 to test the 110.00 support level, USD/CHF tumbled from .9950 to .9907, EUR/USD climbed to 1.1489, and GBP/USD is up a high of 1.2807.

Watch Out For: