FOMC, Trading, Treasury

On China, Lira and Fed - Watch Trump for clues on FX and Interest Rates

August 12, 2018

On China Lira and Fed - Watch Trump for clues on FX and Interest Rates

The United States of America has been helmed by President Donald Trump since Jan 2017, and during this period we have witnessed an impressive bull run in the stock markets and the US Dollar since then.

Many market participants and business leaders have been wrong about Trump’s impact on the markets and business. In fact, many are still struggling to understand his views and opinions, let alone his strategies and plans for the United States and her allies.

Recent market movements on Chinese Yuan and Turkish Lira have caught many by surprise and leaving many clueless. Even the seemingly collegiate like FOMC left some heads pondering about their forecasts on future Fed hikes in 2018.

On China

Back in 2017, President Trump invited President Xi Jinping to the United States and he welcomed his guests at his fancy Mar-a-Lago estate for dinner. Not too long after, President Xi reciprocated by inviting President Trump to Beijing and accosted the Trumps to a private tour at the Forbidden City. 

Things looked good and relationships seem to be rosy.


Until Trump fired the first shots in January 2019 with tariffs on solar panels and washing machines imported from China. And the tit-for-tat trade war soon took a life of its own.

Look here for a good summary and timeline.

Trump’s administration did not stop. They continued to respond to China’s countering acts - and Trump did not mince his words too.

His interviews, speeches and Tweets are no less aggressive than the barrage of tariffs and measures put up against China.

As of now, China has been adopting a defensive stance - restrained by their own admissions. One wonders what will the reaction be if President Xi does decide to retaliate in full? 

I’m not sure but I’m very sure that it might depend on President Trump’s next fewTweets!

On Lira

This came out of nowhere - at least for the FX market traders. 

The Turkish Lira’s plunge in recent days was largely due to the massive tariffs heaped on Turkey by the Trump’s administration. Many analysts have attributed this US response to reflect the pent up emotions in many recent events between American and Turkish parties.

Issues like US actions on Turkish Banks,  alleged Turkish house arrests of US consulate staff, US public furor over Turkish bodyguards impunity in Washington and recent detention of US pastor by Turkey.

Look here for a good summary of the many issues

As usual, President Trump states his opinions  and the current state of affairs with Turkey crystal clear. One must be in denial, if one still believes the Turkish Lira’s plunge was due to fundamentals and traders.

On Federal Reserve

We saw Chairman Jerome Powell taking over Janet Yellen at the Federal Reserve, seen two hikes in 2018 to the current 1.75 - 2.00% and of late - comments on the Fed by Mr Donald Trump. Below is an interesting interview between CNBC and the President.

Mr President views on the Federal Reserve and opinions on the path of the Fed Reserve Rates are not top secret. He shares them openly, on Twitter and on camera - tightening hurts!

Under Chairman Powell, FOMC hiked twice in March and June 2018. Many market watchers are expecting further hikes - some forecasting a total of 3 to 4 hikes in 2018. This means from now till 2019, FOMC has a window of 3 meetings to consider at least hiking once more. That will be in line with professional Fed watchers. 

However will that be in line with President Trump’s opinions?

Forget the economists, trading gurus or technical signs.

Just watch President Trump closer. He is the one to be watched and be analysed.




about author

Seng Ti is currently heading a Treasury & Finance team in a MNC and is serving as the President of the Association of Corporate Treasury (Singapore) aka ACTS. He enjoys reading and discussing about current affairs, politics, life, wine and lives a normal life with his wife and 2 young kids.