Selling Pressure: Dollar suffers after Trump’s comments

Drew Angerer  Getty Images President Donald Trump and Federal Reserve Chair Jerome Powell

Drew Angerer Getty Images President Donald Trump and Federal Reserve Chair Jerome Powell

Gold prices rose on the back of a weaker US dollar on Tuesday, extending gains into a third session after US president Donald Trump said he was "not thrilled" with the US Federal Reserve for raising interest rates.

Atlanta Fed President Raphael Bostic said on Monday he was maintaining his expectation for one more interest rate hike this year, as trade tensions and global events add some downside risk to an otherwise strong U.S. outlook.

Jackson Hole also takes place amid rising uncertainty over the future capacity of the United States administration to implement its agenda, and even over President Trump's tenure in the White House, given the looming midterm elections.

The Federal Reserve last raised interest rates in June, when it signaled that it could raise them two more times this year.

Political advisers to Mr. Trump have lamented that rising rates could stifle job and general economic growth, leading to election day issues for the President during his 2020 re-election campaign.

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The dollar index against a basket of six major currencies was down 0.2 per cent at 95.714, extending losses from the previous day.

Past presidents from both parties have sought to insulate the central bank from political pressure, anxious it could taint the Fed's decision-making and erode its credibility with the public.

As we noted in the recap to yesterday's FOMC minutes, this week's marquee event for the USA economy was always going to be Fed Chairman Jerome Powell's speech at the Jackson Hole Symposium, which takes place at 10:00am ET. Powell, a Republican, has repeatedly said that he believes in the Fed's independence and that he and his colleagues that set interest rates will not bow to outside pressure. "The other countries are accommodated", Trump said.

Corker said, based on his discussions with Powell last week, "I'm certain they're going to continue to be independent and do whatever they feel is appropriate".

Investors were also looking to Wednesday's release of minutes from the U.S. Federal Reserve's August meeting and a speech by Fed Chairman Jerome Powell on Friday for clues on future rate hikes. Year-on-year earnings growth in the United States is expected to be around 24% this year while Europe is forecast to deliver around 9 percent.

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Wall Street analysts near universally expect the Fed will raise rates at its next meeting at the end of September.

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Kohn said he didn't think Powell or the Fed would change their course because of Trump's remarks.

"I'm very concerned, especially given this very divisive and highly politicised environment, that bringing the Fed into that environment could complicate the Fed's communications [to the public], its support in the Congress and among the American people", said Donald L Kohn, who spent 40 years at the Fed and retired as its vice chairman in 2010.

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