Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

“The Law Of Unintended Consequences Is Striking Again”

Courtesy of ZeroHedge. View original post here.

By Garfield Reynolds, macro commentator and Markets Live blogger for Bloomberg

Trump’s Trade Truculence Will Keep Feeding Dollar: Macro View

The law of unintended consequences is striking again. This time it’s the surge in the U.S. dollar that’s being fueled by decisions from President Donald Trump -who seems to prefer a weaker currency – to intensify his attacks on the current "unfair" global trade regime.

The dollar’s spectacular turnaround from first-quarter whipping boy to second-quarter world beater coincided with Trump’s hard turn on global trade. Investors may be deciding that it’s easier to invest in a strong U.S. economy, where winners and losers from Trump’s mercurial policy shifts are more easily identified.

The U.S.’s insistence on using tariffs as a weapon came as the White House dropped any effort to seek trade rebalancing through a weaker USD and decided against naming any nations as FX manipulators.

As Trump’s trade stance became more truculent, the dollar just kept climbing. That was puzzling because classic havens such as JPY, CHF and gold were seeing little benefit as market fears heightened.

It’s become clear that the dollar gained because the impact of Trump’s stance was seen benefiting U.S. assets on a relative basis.

Yes, a major trade war is likely to cause damage to the U.S. economy, but a lot of that will be in the longer term. It’s going to cause significantly more pain, especially in the short term, to all those exporters Trump is targeting; and the U.S. is far and away the world’s largest net importer.

This issue is helping to leach investment out of EM in particular, with major developing economies among those most at risk from a U.S.-initiated trade war. Developing Asia, for example, sends 18% of its exports to the U.S., almost three times what it sends to Japan, the next- biggest single-country destination.

The dollar had plenty of reasons to rise before the trade wars kicked in as an issue: U.S. economic strength amid slowdowns in Europe, China, Japan; prospects for tax-reform induced repatriation flows; Fed rate hikes; and, growing oil exports.

Adding a trade war to that mix makes for plenty of USD strength, especially if such strength adulterates the impact of tariffs and makes Trump all the more determined to play hardball on trade.


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!





You must be logged in to make a comment.
You can sign up for a membership or get a FREE Daily News membership or log in

Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!