European stocks have got off to a slow start after U.S. President Donald Trump criticized the Federal Reserve for its policy of pushing rates up, while the Chinese yuan weakened to its lowest levels in a year, before pulling back sharply.
While it’s no surprise that the president wants a weaker U.S. dollar, he has indicated just such a view on previous occasions, as has his Treasury Secretary Steven Mnuchin, this is the first time he has directly criticized the U.S. central bank for helping push it higher.
Maybe someone should point out to the president that the reason the U.S. dollar is so strong is because the U.S. economy is currently the brightest light in the economic sky, largely as a result of his policies, and which could result in the U.S. economy posting a 4% annualized Q2 GDP reading next week.
Nonetheless, the Fed will continue to look at pushing rates up, while the U.S. administration will continue to push back on any rise in the U.S. dollar, which they feel is being engineered by either the Chinese or the Europeans in order to offset concerns about U.S. trade policy.
The pound continues to come under pressure as Prime Minister Theresa May visits Northern Ireland to reassure people that there will be on hard border with the Republic of Ireland, as investors continue to price in the rising political risk of a breakdown in Brexit talks.
Today’s public finance numbers for June showed that the U.K. government borrowed £3.6 billion, a slight increase of £3.4 billion in May.
Elsewhere in Europe, the Italian markets have slid sharply on the back of speculation that Italian Finance Minister Giovanni Tria may be forced out. Both equity and bond markets have come under pressure after an Italian newspaper reported that both Matteo Salvini and Luigi di Maio, Italy’s new populist leaders, might try and force him out in a battle over the running of state lender CDP.
It’s another busy day on the U.S. earnings front with the latest Q2 updates from General Electric (NYSE:GE) and Honeywell due before the open.