Archives of “Economy of the United States” tag

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Pres. Trump: Tariffs that are set to go in place on Sunday against China are still on

  
Analysis, Politics
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Pres Trump says tariffs will go on as planned on Sunday.

Pres Trump says tariffs will go on as planned on Sunday.
Before departing the White House for the weekend told reporters,
  • He can’t say whether he will speak to Xi, but US is speaking to China
  • Tariffs set to go in place on Sunday against China are still on
  • “We are going to win the fight” with China
  • Trade meeting with China in September is still on, it has not been canceled
  • US is in incredible negotiating position with China because of tariffs it has placed on Chinese imports
  • He sees a connection between situation in Hong Kong and China trade talks
  • Chinese response in Hong Kong will be much more violent if were not for the trade talks
  • Repeats China wants to make a trade deal
On other topics:
  • Too soon to call for evacuation Florida.  Determination will likely be made on Sunday
  • Asked if he would like to see negative interest rates in the United States, says no.

The squeeze remains on.

Trump says euro ‘dropping like crazy’ as he laments dollar

  
Analysis, Forex
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Trump with his usual rant against the dollar and the Fed

The latest tweet:
The Euro is dropping against the Dollar “like crazy,” giving them a big export and manufacturing advantage…and the Fed does NOTHING! Our Dollar is now the strongest in history. Sounds good, doesn’t it? Except to those (manufacturers) that make product for sale outside the U.S. We don’t have a Tariff problem (we are reigning in bad and/or unfair players), we have a Fed problem. They don’t have a clue!
Here’s what ‘like crazy’ looks like:
Trump with his usual rant against the dollar and the Fed
The euro is down 0.75% against the US dollar in the past three months. The euro is higher today than it was on the day Trump was elected… ‘like crazy’ indeed.
EURUSD in Trump's term
Trump is continuing and says:
If the Fed would cut, we would have one of the biggest Stock Market increases in a long time. Badly run and weak companies are smartly blaming these small Tariffs instead of themselves for bad management…and who can really blame them for doing that? Excuses!
There are rumors that he was going to delay the tariffs that kick in on Sunday but this doesn’t sound like a guy who is about to backtrack.

Dollar holds firmer amid shift in risk mood earlier

  
  Analysis
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Markets are still largely more optimistic following Trump’s remarks on trade

EUR/USD H1 26-08

The dollar is holding firmer across the board following Trump’s more optimistic take on trade relations with China earlier in the European morning. Although the greenback has pared its advance against the aussie, it has notably gained against the euro, pound and yen.

EUR/USD is now trading near the lows for the day at around 1.1117 with the euro also finding little comfort from the latest German Ifo survey report moments ago.
Although the dollar is traditionally seen as a haven currency, one of the key factors affecting the currency now is Fed pricing.
Earlier in the day, Fed fund futures saw ~29% odds of the Fed cutting rates by 50 bps in September. After Trump’s remarks, those odds have been slashed to just ~15% now.
As such, that is helping to put a bid back in the dollar. Looking ahead, be wary of potential trade developments as it will continue to play a part in influencing Fed expectations ahead of the September FOMC meeting.

Donald Trump’s weekend comments on trade war escalation – regrets, retractions, and reversals

  
Analysis, Politics
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US President Trump had comments on Saturday morning on his regrets. Later reversed.

Let’s try to plot a timeline and get some sort of order, bolding mine:
1.
During a breakfast with British Prime Minister Boris Johnson on the sidelines of the Group of Seven meeting … a reporter asked Trump whether he had any “second thoughts” about his escalating trade war with China. 
Trump responded, “Yeah, sure. Why not. Might as well,” he said. “Might as well. I have second thoughts about everything.”
2.
Trump then claimed that talks were going well with China and that he planned to back away from some of his recent threats, such as seeking to force companies to leave China.
3.
The White House weighed in later, said Trump’s suggestion that he regretted escalating the trade war with China was “misinterpreted” and that what he regrets is not raising tariffs higher.
On the back down over ordering US companies out of China:
  • On Friday, Trump had said that “I hereby order” U.S. companies to prepare to stop doing business with China,
  • on Sunday Trump reversed this also, said he had no plans to invoke this law “I have no plans right now,” Trump said. “Actually, we’re getting along very well with China right now.”
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While Trump can be criticised on a policy level, he is very active on policy setting, on a personal level it does appear he deserves some sympathy with respect to his declining faculties. I hope he can find help and wish him well.
US President Trump had comments on Saturday morning on his regrets. Later reversed.

Trump pressured Mnuchin to name China a currency manipulator

  
  Analysis
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Trump increasingly dictatorial

The Washington Post reports that Trump “exerted immense pressure” on Mnuchin to name China a currency manipulator.
One of the people with knowledge of Trump’s pressure on Mnuchin said the White House wanted China labeled as a currency manipulator so that it prod Chinese officials back to the negotiating table. This has proven unsuccessful so far. Instead, it has inflamed tensions between the two countries.
Read it here.

Jamie Dimon and Warren Buffett can’t get it right

  
  Analysis
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Jamie Dimon and Warren Buffett can’t get it right

15 months ago Jamie Dimon and Warren Buffett were warning people not to buy bonds. At the time, US 10-year yields were at 3.0%. Today they’re at 1.48%. 30-year yields are now below 2%.
Here’s a look at 30-year futures since:
Jamie Dimon and Warren Buffett can't get it right
They’re up 16% while the S&P 500 and Berkshire Hathaway shares are both flat.
He wasn’t alone. On the same weekend last year, JPMorgan CEO Jamie Dimon was warning about the 10-year rising to 4%.
Dimon
The point here isn’t to point out incorrect calls. I’ve had plenty myself.
It’s a reminder that no one knows the future. Jamie Dimon is going to continue to be the greatest bank CEO of his era while Buffett will remain the greatest investor of all time.
Sometimes you’re wrong. Roll with the punches.

Trump says latest tariffs could be raised to above 25%

  
  Analysis
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Trump on tariffs

  • Trump says he can do more or he can do less on tariffs depending on how negotiations go
  • Could be raised “well above” 25% but “we’re not looking to do that”
  • He also said the new tariff is for a ‘short-term’ period
  • If China doesn’t want to trade with us anymore that’s fine with me
  • I think Xi wants to do a deal, but he’s not moving fast enough
  • China isn’t moving fast enough on fentanyl
  • The stock market will “take a little hit but it it will be phenomenal”
That’s not exactly a playbook that anyone can depend on.

Full text of the July 31, 2019 FOMC statement

  
  Analysis
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The full text of the July 31 statement from the FOMC

Federal Reserve issues FOMC statement
Information received since the Federal Open Market Committee met in
June indicates that the labor market remains strong and that economic
activity has been rising at a moderate rate. Job gains have been solid,
on average, in recent months, and the unemployment rate has remained
low. Although growth of household spending has picked up from earlier in
the year, growth of business fixed investment has been soft. On a
12-month basis, overall inflation and inflation for items other than
food and energy are running below 2 percent. Market-based measures of
inflation compensation remain low; survey-based measures of longer-term
inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster
maximum employment and price stability. In light of the implications of
global developments for the economic outlook as well as muted inflation
pressures, the Committee decided to lower the target range for the
federal funds rate to 2 to 2-1/4 percent. This action supports the
Committee’s view that sustained expansion of economic activity, strong
labor market conditions, and inflation near the Committee’s symmetric 2
percent objective are the most likely outcomes, but uncertainties about
this outlook remain. As the Committee contemplates the future path of
the target range for the federal funds rate, it will continue to monitor
the implications of incoming information for the economic outlook and
will act as appropriate to sustain the expansion, with a strong labor
market and inflation near its symmetric 2 percent objective.

In determining the timing and size of future adjustments to the
target range for the federal funds rate, the Committee will assess
realized and expected economic conditions relative to its maximum
employment objective and its symmetric 2 percent inflation objective.
This assessment will take into account a wide range of information,
including measures of labor market conditions, indicators of inflation
pressures and inflation expectations, and readings on financial and
international developments.

The Committee will conclude the reduction of its aggregate securities
holdings in the System Open Market Account in August, two months
earlier than previously indicated.

Voting for the monetary policy action were Jerome H. Powell, Chair;
John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James
Bullard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles.
Voting against the action were Esther L. George and Eric S. Rosengren,
who preferred at this meeting to maintain the target range for the
federal funds rate at 2-1/4 to 2-1/2 percent.

ALERT : Federal Reserve lowers interest rates by 25 basis points, as expected

  
  Analysis
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Highlights of the July 31, 2019 Federal Reserve statement:

  • Rates lowered to 2.00%-2.25% from 2.25%-2.50%, as expected
  • Fed says economic activity is rising at ‘moderate rate’ versus ‘a moderate rate’ prior
  • Fed says labor market ‘remains strong’ versus ‘remains strong’ prior
  • 2 dissents with George and Rosengren dissenting
  • Repeats that business investment has been soft
  • Repeats that ” uncertainties about this outlook remain.”
  • Market-based measures of inflation “remain low” versus “have declined”
  • Repeats that survey based measure of inflation “little changed”
  • Repeats that inflation “running below” 2% target
  • Says cut was “in light of the implications of global developments for the economic outlook as well as muted inflation pressures”
The previous statement said the Fed ” will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion” and also that “uncertainties about this outlook have increased.” The line about “uncertainties about this outlook remain” unchanged.
Guidance is also unchanged with the new statement saying ” will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.”
The quick view here is that the statement is pretty much identical to the previous one. The market wanted a more-dovish signal. The odds of a Sept cut have fallen to 69% from 78%.
Powell’s press conference is at 2:30 pm ET.

Chinese companies looking to buy U.S. farm products -Xinhua

  
Analysis, Politics
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Some Chinese companies are seeking new purchases of U.S. agricultural products, China’s official Xinhua News Agency said on Sunday, citing authorities, as Beijing and Washington look for ways to end a protracted trade war.

U.S. President Donald Trump and Chinese President Xi Jinping agreed at last month’s G-20 summit in Osaka to restart trade talks that stalled in May.

Trump said at the time he would not impose new tariffs and U.S. officials said China agreed to make agricultural purchases. But Trump said on July 11 that China was not living up to promises to buy U.S. farm goods.

Chinese businesses have made inquiries with U.S. exporters to buy crops and agricultural products and applied for the lifting of tariffs, Xinhua said, citing Chinese authorities. China’s Customs Tariff Commission will arrange for experts to appraise the Chinese companies’ tariff exclusion applications, Xinhua said.

“Relevant Chinese departments expressed hope that the United States would meet China halfway, and earnestly implement the United States’ relevant promises,” the news agency said, without elaborating.

The world’s two largest economies have been embroiled in a tariff battle since July 2018, as the United States presses China to address what it sees as decades of unfair and illegal trading practices. (more…)

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