Roundup – 20th July

The Dollar has been buffeted in the past 24 hours by US President Trump’s repeated criticism of Federal Reserve rate hikes, a strong Dollar and a weak Renminbi and Euro. While the White House tried to backtrack on these comments and US manufacturing indices in July were strong, the net result is that the Dollar is about 0.5% weaker today but still in the middle of its month-long range. President Trump is unlikely to directly challenge the Fed’s independence but by breaking with protocol he is certainly causing a degree of discomfort.

The Euro has appreciated to a multi-year high in trade-weighted-terms but EUR/USD is still only just above 1.17 which is what seemingly Trump is focusing on. Chinese policy-makers are in any case not taking notice and pushing the Renminbi weaker which in itself is causing volatility in Asia-Pacific markets. Sterling and the UK for once failed to really make the headlines, with the currency a tad stronger after five consecutive down sessions.

Focus next week will be on:

1. The meeting between the President Trump and European Commission President Jean-Claude Juncker (on 25 July). Trump’s penchant to blow hot and cold, including during recent meetings with British Prime Minister May and Russian President Putin, promises to keep this encounter lively with the issue of trade and import tariffs likely to figure high on the agenda.
2. The release of preliminary US GDP data for Q2 (on 27 July), with estimates pointing to a robust 4% quarter-on-quarter annualised. This may be enough to put a floor under the Dollar but it has in recent weeks seemingly lost its steam.