Global macro overview for 12/10/2018
During a short speech for journalists, Donald Trump said: “They are very restrictive. I think the Fed is crazy. ” It might seem to be a slip, because lowering the trust in the central bank by the executive can have negative consequences in the future. In addition, the Federal Reserve does not behave erratically. Nevertheless, in the following hours it turned out that it was not a slip, because, in a telephone interview for Fox Business television, Donald Trump said: “The Fed is crazy. They raise interest rates and this is absurd. ” At the suggestion that the declines may be related to the trade war, the US president replied, “This is not a problem. The problem is, in my opinion, the Fed. The Fed is crazy. “
The president publicly criticizes the central bank – led by President Powell, whom he appointed – for interest rate hikes and admitted that he was “not happy” in September, after the third rate hike. Trump, therefore, seems to represent a completely different view of the Federal Reserve than its predecessors. For more than two decades, the presidents avoided public comments on the Fed’s interest rate policy as a way of showing respect for the independence of the institution.
Powell’s goal is to prolong the second longest economic expansion in the US by raising interest rates fast enough to prevent overheating, but not so fast that the central bank stifles growth. Powell said last week that he expects to maintain the current path of gradual interest rate hikes while monitoring the risk in the economy. One of the reasons why the Fed raises interest rates even with small signs of inflation collapse is that the unemployment rate, which fell to 3.7% in September, is at a level that many officials expect to accelerate wage growth over time and prices.
Let’s now take a look at the US Dollar Index technical picture at the H4 time frame. The market has retraced 50% of the previous swing high and currently is trading around the level of 94.98 in oversold conditions. The momentum is still below its fifty level, so the price is still trading below the black trend line. In a case of a breakout, the next target for bulls is located at the level of 95.18 and then at 95.32. The bias is to the downside as long as the level of 95.71 is violated.