Economic News | March CPI lower than expected

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“Markets are processing what’s going on … particularly trade policies … so markets are struggling with uncertainty and that means volatility … having said that [under the challenging circumstances]!markets are functioning the way they are supposed to function …”
 
I like Powell's subtle jab. First, we have to know what the policies are. Then, even when we know, the economic effects are uncertain.

Hey Trump, he's talking to you!
 


“… For foreign sellers of all manner of goods, including cars, cognac and Scottish tweed, the dollar’s steep slide is a double whammy, compounding losses caused by President Trump’s import levies. For central banks around the world, the rapid strengthening of their own currencies heaps pressure to cut interest rates more aggressively.

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Because of its role as the primary currency used for global trade and finance, swings in the dollar have significant global consequences.

“For exporters, you’re not getting the currency eroding some of the tariff impact for the end U.S. consumer,” said Derek Halpenny, the London-based head of global markets research for the Japanese bank MUFG. “It has a bigger negative impact for sure.” …”
 


“… For foreign sellers of all manner of goods, including cars, cognac and Scottish tweed, the dollar’s steep slide is a double whammy, compounding losses caused by President Trump’s import levies. For central banks around the world, the rapid strengthening of their own currencies heaps pressure to cut interest rates more aggressively.

IMG_6433.jpeg

Because of its role as the primary currency used for global trade and finance, swings in the dollar have significant global consequences.

“For exporters, you’re not getting the currency eroding some of the tariff impact for the end U.S. consumer,” said Derek Halpenny, the London-based head of global markets research for the Japanese bank MUFG. “It has a bigger negative impact for sure.” …”

“… The decline in the dollar has come as a surprise to many. Economic textbooks teach that foreign currencies tend to weaken when economies are hit with tariffs, helping to make goods cheaper to offset the cost of the levies.

Instead, investors have reacted to Trump’s back-and-forth trade policies by dumping U.S. assets, unwinding huge bets they made in recent years on the idea that the U.S. would economically outshine the rest of the world. As investors sell U.S. dollar assets, they recycle them into home currencies, pushing up their value.

The slide in the dollar has fueled questions about the damage to the American economy from Trump’s shift in trade policy and whether the currency will remain a haven for investors in times of market stress. …”
 
Trump is almost certainly going to move on Powell. What Japan did to our 10 year in particular caught the White House off guard. It was an embarrassment and forced Trump to rescind tariffs. He will want the power to move levers - including interest rates but also dipping back into QE - so that if a foreign debt holder (or any debt hold for that matter) tries to exert pressure through the treasury markets - he can control the situation more effectively. The global markets will not react kindly to the president of the united states taking control of the federal banking system.

Also Kevin McCarthy thinks we are all dumb as fuck.
 
“… The decline in the dollar has come as a surprise to many. Economic textbooks teach that foreign currencies tend to weaken when economies are hit with tariffs, helping to make goods cheaper to offset the cost of the levies.

Instead, investors have reacted to Trump’s back-and-forth trade policies by dumping U.S. assets, unwinding huge bets they made in recent years on the idea that the U.S. would economically outshine the rest of the world. As investors sell U.S. dollar assets, they recycle them into home currencies, pushing up their value.

The slide in the dollar has fueled questions about the damage to the American economy from Trump’s shift in trade policy and whether the currency will remain a haven for investors in times of market stress. …”
wasn't weakening the dollar one of the goals they stated with the tarifs? (I know they have given a different reason for them every day but...) Something about tired of bearing the burden of being the world's reserve currency or something?
 
wasn't weakening the dollar one of the goals they stated with the tarifs? (I know they have given a different reason for them every day but...) Something about tired of bearing the burden of being the world's reserve currency or something?
Yes, it was, but economists have expressed surprise at that outcome under thee policies — pointing to countervailing forces of uncertainty and volatility of Trump’s shifting policy pronouncements and aims negatively impacting the strength of the dollar and bond markets even as his broadly described policies typically would be expected to strengthen the dollar.

The MAGA view is that the weakening dollar proves Trump is right and his madman/chaos theory of international relations also is working in international trade to produce results (weakening dollar despite significantly increasing tariffs) that traditional trade policy cannot — citing Nixon moving the dollar off the gold standard and implementing tariffs to devalue the dollar and improve the competitiveness of U.S. exports in 1971 as the model. [BTW, Nixon’s shock approach contributed to actions by OPEC that greatly strengthening OPEC’s economic power but that is a different story of unintended consequences]
 
Yes, it was, but economists have expressed surprise at that outcome under thee policies — pointing to countervailing forces of uncertainty and volatility of Trump’s shifting policy pronouncements and aims negatively impacting the strength of the dollar and bond markets even as his broadly described policies typically would be expected to strengthen the dollar.

The MAGA view is that the weakening dollar proves Trump is right and his madman/chaos theory of international relations also is working in international trade to produce results (weakening dollar despite significantly increasing tariffs) that traditional trade policy cannot — citing Nixon moving the dollar off the gold standard and implementing tariffs to devalue the dollar and improve the competitiveness of U.S. exports in 1971 as the model. [BTW, Nixon’s shock approach contributed to actions by OPEC that greatly strengthening OPEC’s economic power but that is a different story of unintended consequences]
BTW, here is a good background article on the Nixon Administration response to the Oil Embargo that led to the petrodollar:

 


“Markets are processing what’s going on … particularly trade policies … so markets are struggling with uncertainty and that means volatility … having said that [under the challenging circumstances]!markets are functioning the way they are supposed to function …”

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Independence of the Fed is an important structural reason for international reliance on the dollar. Firing Powell before the end of his term and replacing him with a Trump crony likely would shake the markets, especially the bond market and dollar value.
 
IMG_6441.jpeg

Independence of the Fed is an important structural reason for international reliance on the dollar. Firing Powell before the end of his term and replacing him with a Trump crony likely would shake the markets, especially the bond market and dollar value.
“… On Wednesday, during a speech in Chicago, Powell said the central bank needed to make sure that any increase in prices from tariffs didn’t lead to continued inflationary pressures.

Powell said he didn’t believe the Fed’s independence to set interest rates as it sees fit would be compromised because it is “very widely understood and supported in Washington, in Congress, where it really matters.”

He added, “We’re never going to be influenced by any political pressure. People can say whatever they want. That’s fine. That’s not a problem. But we will do what we do strictly without consideration of political or any other extraneous factors.” ”

 

European Central Bank cuts interest rates, warns of ‘deteriorated’ growth outlook on trade tensions​



“… A rate cut was fully anticipated by markets, with an around 94% chance of a 25-basis-point trim being priced in ahead of the decision, according to LSEG data.

The cut takes the ECB’s deposit facility rate, its key rate, to 2.25%. At its highs in mid-2023 it had been at 4%.

Tariff developments in recent weeks are widely seen by analysts and economists as a key reason for the ECB to cut interest rates. Even though many of the initial duties imposed by the U.S., as well as retaliation measures, have been put on ice or eased, fears about how they could affect economic growth have been rife. …”
 


“Markets are processing what’s going on … particularly trade policies … so markets are struggling with uncertainty and that means volatility … having said that [under the challenging circumstances]!markets are functioning the way they are supposed to function …”

I don't need an explanation from Powell

He needs to understand that Trump is a genius playing 96 dimensional chess

He just needs to slash fed rates and everthing will be hunky dory
 
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