Dollar and bonds fluctuate amidst a standoff between Trump and Powell

Dollar and bonds fluctuate amidst a standoff between Trump and Powell


The dollar remained volatile on rumors about the trade agreement and questions about the future monetary policy of the Fed. The dollar index ended near the balance Tuesday evening 97.849 points (+0.05%). The euro rose 0.06% to $1.1077.

In the US bond markets, the yield on the 10-year T-Bond dropped 3 basis points to 1.78% after a meeting at the White House between Donald Trump and Fed Chairman Jerome Powell.

During this interview, the US president said he once again “protested” against the level of interest rates, which he considers too high, while the Fed said in a statement that Jerome Powell had repeated what he said in public about the level of rates. The head of the Fed has recently indicated several times in public that the rate is now at an “appropriate” level, after three consecutive declines since July.

More than the monetary policy, it is the uncertainties of the trade negotiations between the United States and China which concern the last days the investors. However, it appears since the beginning of the week that these discussions, presented as being “in the final phase” last week, now seem to seriously stumble on the issue of the dismantling of customs taxes already implemented for 16 months between the United States and China.

While Beijing calls for a schedule to remove these tariffs, Washington would be willing to waive the taxes scheduled on October 15 (suspended pending the agreement of Phase 1) and December 15. Monday, the TV channel US ‘CNBC’ had raised a “pessimistic” climate on the Chinese side over the possibility of reaching an agreement, while Donald Trump put pressure on Beijing on Tuesday, again threatening China to raise taxes again if an agreement was reached. The US president said he was “very happy” about the ongoing negotiations, according to the CNBC channel, which relayed the president’s remarks.

In China, the governor of the People’s Bank of China (BPC), Yi Gang, announced on Tuesday that the authorities will boost their credit support and continue to lower real interest rates. Beijing plans to increase the credit capacity of banks, he assured the day after the decline by the PCB of one of its short-term rates. On the Shanghai Stock Exchange, the Shanghai Composite index finished up 0.85% Tuesday after these announcements, and the Hang Seng jumped 1.5% in Hong Kong despite a new day of pro-democracy demonstrations.

Pending the outcome of the negotiations, Washington has agreed to postpone a second time trade sanctions that were to come into force on November 19 against Huawei, the Chinese giant of telecom equipment and smartphones. Huawei, blacklisted last May, has received a further 90-day reprieve before it can no longer buy or sell its products to US companies.

Despite this reprieve, Huawei remains subject to certain limitations, including that of trading with Google, which prohibits access to services associated with Android, including the Google Play Store.

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Javier Davis produces news on stocks, currencies, bonds, commodities, and real estate. His in-depth research covers most of the major financial markets in America, Europe, and Asia. His research is based on the interconnected relationships among economic and technical factors that drive valuations in the markets, with an emphasis on how to formulate investment strategies. From interest rates to inflation to economic growth and much more, the fundamental concepts presented on this website provide an essential foundation of knowledge for investors to profit in stocks, bonds, commodities, currencies, and real estate markets.