Fed Chairman delivered his much anticipated speech at the Jackson Hole Symposium earlier this morning. Here is the key comment which summarizes his speech:
“… we will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective”
Powell does admit that geopolitics, the global slowdown, and international trade are ongoing issues the Fed will have to deal with, and the Fed needs to see how these issues will affect the US.
For the first 45 minutes after the speech, the reaction was relatively muted, with long bonds, gold, stocks, and all slightly higher.
Then President Trump began a tweet storm:
“Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States. Also, I am ordering all carriers, including Fed Ex, Amazon, UPS and the Post Office, to SEARCH FOR & REFUSE all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Xi said this would stop - it didn’t. Our Economy, because of our gains in the last 2 1/2 years, is MUCH larger than that of China. We will keep it that way!”
After Trump’s tweets, bonds and gold screamed higher, while stocks and USD dropped over 1 percent. USD/JPY dropped 100 pips from 106.60 to 105.60 and EUR/USD rose from 1.1073 to 1.1140. However, the biggest loser is the CNH, with USD/CNH rallying from 7.0835 to 7.1219 and moving to test recent highs from August 6th near 7.1400.
Source: Tradingview, FOREX.com
Interestingly now, in what was expected to be a non-event this weekend, we have the G-7 meeting. We’ll have to wait and see if Trump sets off any more Twitter fireworks over the weekend. But for now, watch the 7.1400 level as key resistance in USD/CNH.