Trump versus Iran, the FED and the Greenback

It’s not just the Dollar that will be going for a ride and, while NFP numbers are in focus, there are a lot of balls in the air…
Bob Mason
Arms trade business concept.

As the U.S celebrated Independence Day, the U.S President will have enjoyed the military show of force that has not been laid out in our generation at least.

While some may have balked at the spectacle, there is a reality to Trump’s presidency. Since taking office, Trump has been quite successfully crossing off his campaign pledges.

As far as U.S voters are concerned and voters in any election around the world, it’s an almost rarity that so many promises are kept.

Going into office, many had said that Trump would only be able to push his agenda within the 1st hundred days, yet he keeps going.

Iran

One of the U.S President’s pet peeves was certainly the 2015 nuclear agreement. As promised, the U.S withdrew from the agreement last year and quickly reintroduced sanctions to cripple the Iranian economy.

Having brought down ISIS and delivered some stability within the Middle East, Iran remains the red flag for the U.S, the Saudis, and Israel.

The introduction of sanctions has hit Iran hard and perhaps as intended, has led to increased tension between the 2 nations.

Trump recently came close to taking military action in response to the downing of a drone. The latest talk is of Iranian breaching its uranium limits. The limits wouldn’t be in breach of any agreements with the U.S, but with the remaining 6 nations. If Iran had played this a little smarter, they would have attempted to keep on the right side of the remaining 6. A breach would ultimately give the likes of the EU an easy get out from a difficult situation.

Whether there will be any military action remains to be seen. Trump has enough military might in the region to respond to any material threats. And, with the lack of a relationship with the Iranian government, there’s unlikely to be much, except other Western leaders, to hold him back.

Crude oil prices and the Dollar would benefit, however, and that would certainly rile a president desperate for cheap oil and a weak Greenback.

The FED

Going onto the Greenback, the U.S President may also get his wish on the monetary policy front. Nonfarm payroll figures due out later today could set the tone for the end of the month FOMC meeting.

For now, the markets have priced in a rate hike, but the numbers will need to support it. If the FED does cut rates, however, it’s not because of Trump’s demands and threats of removing FED Chair Powell. The FED would almost certainly cite the U.S – China trade war as the cause.

As the presidential campaigns kick off, there does appear to be very little competition for Trump. The tables could turn, however, if there is a longer lasting slowdown in the U.S economy.

The FED’s focus on the jobs market will be aligned with that of the U.S administration. After all, if voters are working there’s unlikely to be too much of a backlash to a fledgling economy.

It will be interesting to see how much progress is made on trade talks through to the year-end. While the U.S administration claims to be close, the on and off negotiations do suggest that there are some stumbling blocks.

One, in particular, is Huawei. It’s unlikely that Beijing will get to the finish line without the U.S changing stance. Allowing Huawei to continue purchasing from U.S companies just isn’t going to cut it…

For the Dollar

There’s been plenty of chatter on whether the Dollar can materially weaken. While Trump has once again called China and the EU currency manipulators, the very uncertainty over the global economy and rising geopolitical risk would support demand for the Greenback.

With the U.S trade deficit, Trump’s push to bring down the mighty Dollar has some logic to it. If foreign goods become too expensive, U.S manufactured goods should become more price competitive. The Dollar would need to really tank, however, for U.S goods to be able to compete, tariffs or not.

At the time of writing, the Greenback was down 0.04% to $96.718. Trump will be hoping of a big slide later today. Better than expected numbers would not only give the Dollar a boost but would also see his beloved equity markets take a hammering.

There’s always Iran and China and the currency manipulators, however, to provide a distraction.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US