Be Careful What You Wish For

Who’s in charge of ‘splaining things to the prez?  Trump says he wants a cheaper dollar so the US can be more competitive in global trade.  Yet, because the US is a net importer, a cheaper dollar will simply increase the cost of imported goods (just like tariffs.)

The net effect will be higher inflation which will in turn make it that much less likely for the Fed to lower interest rates — a frequent topic of Trump’s tantrums.

Sometimes interest rates and the DXY play nicely; sometimes they don’t.  Rates have already settled quite a bit lower even as the dollar edges slightly higher.

Perhaps Larry “King Dollar” Kudlow should also explain to Trump that a breakdown in the dollar (the dashed red trendlines) is sometimes detrimental to inflated stock prices — a frequent topic of Trump’s boasts — while a breakout (the purple TL) can be very positive.And, while it’s possible Powell can be intimidated, who among us would be surprised if the Fed ignored the next opportunity to cut rates — no matter how justified — in order to send the message that they won’t be bullied?

Futures are edging lower as the SMA10 edges higher, setting up the another test of the first line of defense.Speaking of tests, we should find out today how much support DB can expect from the ECB et al.

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