Published: Wed, June 12, 2019
Economy | By

U.S. Dollar Unchanged; Trump Says Fed Officials "Don’t have a clue"

U.S. Dollar Unchanged; Trump Says Fed Officials

Many analysts think the Fed will cut rates a couple of times before year's end, perhaps beginning in July.

"The history of this spread back to '89 suggests the market has never priced an amount of inversion equal to today's levels without the Fed cutting", the analysts wrote. Although the Fed does not monitor CPI inflation as closely as it does the core PCE price index, a fall in the CPI rate would point to cooling inflationary pressures in the economy.

U.S. Treasury Secretary Steven Mnuchin, speaking in an interview Saturday in Fukuoka, Japan, where he was attending a G-20 meeting of finance ministers and central bank chiefs, said the proposal does not signal a preference for a weaker dollar. Today, the U.S. will release the inflation numbers.

The US consumer price index is forecast to have increased by 1.9% year-on-year in May, easing marginally from the prior 2.0%. Non-alcoholic beverages increased 1.2% last month. "The Fed Interest rate way too high, added to ridiculous quantitative tightening!"

Fresh worries erupted on the trade front after President Donald Trump said he was holding up a deal with China and had no interest in moving ahead unless Beijing agrees to four or five major points.

The next meeting of the Federal Open Market Committee, the Fed's governing board, will be held June 18-19. -China trade war after Washington toughened its stance, but losses were cushioned by a muted reading on inflation that backed the case for an interest rate cut.

Inflation has been consistently muted, slightly below or near the Federal Reserve's target of 2% even though the economy is poised in July to set the record for the longest expansion in US history. Current: 2.25%-to-2.5%. CPI is a key gauge of changes in purchasing trends and inflation.

Capital flows tend to move in the direction of the most advantageous or improving returns, with lower rates normally seeing investors driven out of and deterred away from a currency while rising rates have the opposite effect.

Micron Technology Inc, Applied Materials Inc and Lam Research Corp fell about 5% and were the top losers among S&P 500 companies.

"While we doubt that the Fed will carry through with the 100 basis points or so of policy easing now priced by markets, the longer trade tensions drag on, the greater the chance the Fed will be forced to respond aggressively", says ING's Knightley, in a note to clients after the release. A specialist broker can deliver you an exchange rate closer to the real market rate, thereby saving you substantial quantities of currency.

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