Greenback weak point as a consequence of risk to Fed independence – Commerzbank

Fed independence beneath hearth

“As a result of such a transfer would clearly not be taken due to any misconduct on Powell’s half, however could be motivated by the President’s dissatisfaction with the Fed’s financial coverage, it could spell the top of the US central financial institution’s independence. Financial coverage might then solely be carried out in a manner that fits the person within the White Home.”

“I can guess what a lot of our readers are asking at this level: How a lot additional can the US greenback weaken? We just lately introduced 1.15 as our goal for the EUR-USD trade charge (the measure that’s the related benchmark for greenback weak point or power for almost all of our readers). That is roughly the extent at which EUR-USD is presently buying and selling. Admittedly, we anticipated 1.15 for a later date.”

“That choice is now not accessible. If the FOMC really lowers the important thing rate of interest hall on Could 7, it should count on this to be interpreted as a transparent sign that it’s bowing to political strain. The harm could be immense and lasting. It should now reply ‘with a bang’ – despite the fact that FOMC members should notice that the US president can be unlikely to again down. Briefly, as a result of the de-escalation situation appears implausible, the hazard for the US greenback is so acute.”