Gold prices extend gains as dollar sags after Donald Trump remarks

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Image of IG client sentiment

The dollar fell versus the euro and pound on Tuesday (Aug 21) after US President Donald Trump hit out at the Federal Reserve's interest rate rises, accusing it of not backing his economic plan, while most equity markets climbed looking ahead to China-US trade talks.

US central bankers discussed raising interest rates soon to counter excessive economic strength but also examined how global trade disputes could batter businesses and households, minutes of the Federal Reserve's last policy meeting showed on Wednesday.

President Donald Trump continued to criticise the Federal Reserve's recent monetary policy decision in an interview with Reuters on Monday.

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. Trump told Reuters, referencing Powell. Trump nominated Powell past year to replace former Fed Chair Janet Yellen.

Trump has made reducing United States trade deficits a priority and the combination of rising interest rates and a strengthening dollar pose risks for export growth.

This isn't the first time Trump has taken exception to the Fed's gradual interest-rate hikes.

"I think China's manipulating their currency, absolutely".

China slaps back at latest USA tariffs in trade war escalation
The US president said any resolution would "take time because China's done too well for too long, and they've become spoiled". China's Commerce Ministry said Washington was "remaining obstinate" by implementing the latest tariffs, according to Reuters.

Wall Street's major indexes rose on Monday on optimism over trade talks between the United States and China, though they fell from session highs after Trump's comments. And so they're being accommodated and I'm not. While economic theory (in the simplest terms) says that rate hikes slow the pace of economic growth, interest rates today remain historically low, and measures of credit growth show that access to loans is still generally easy.

The euro brushed an 11-day high of $1.1493, stretching its gains after climbing about climbing about 0.35 per cent overnight.

Powell took over as Fed chairman in February and the bank has raised interest rates twice since his ascension.

The latest Reuters interview followed comments that Trump made at a fundraiser on Long Island on Friday.

"Well, the Fed was set up to be independent from politics as much as you can be in Washington, from the whims of the moment, whether it's the president or whether it's the Congress", Shelby said.

The dollar came under pressure on Wednesday as political pressure on President Trump increased with two of his former advisers facing possible prison sentences that could hurt his Republican Party's November midterm election prospects and widening a criminal investigation that has overshadowed his presidency.

After sliding to a two-year low of 15.70 last week as the Turkish crisis triggered a broad flight from emerging markets, the rand has regained some ground, advancing around 8% in the last seven days as the greenback's rally faltered.

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