Dollar Falls As Inflation Risk Recedes

By www.ForexConspiracyReport.com

http://www.forexconspiracyreport.com/dollar-falls-as-inflation-risk-recedes/
When the Fed announced that they
would be raising interest rates the
dollar soared.

However, the actions of the Fed are data
driven and the data does not indicate a
huge surge of inflation and thus the
data does not indicate a very rapid
rising of interest rates.

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Bloomberg writes about the dollar’s
recent fall as a reaction to an
inflation miss.

The dollar declined to the lowest level in
five months versus the yen

also crossing the 200-day moving
average, after U.S. inflation
unexpectedly fell in March for the first
time since February 2016, raising doubts
about the global reflation trade and the
prospect of accelerated Federal Reserve
interest-rate hikes.

What’s more, the so-called core
consumer-price index, which excludes
volatile food and energy prices, fell for
the first time since 2010.

The fallout from a falling dollar
includes hurting the carry trade,
improving US manufacturing sales
offshore and delaying the increase of
US debt payments.

When uncertainty roils the currency
market money moves into safe haven
currencies.

Unfortunately safe haven currencies like
the yen and Swiss franc have very low
interest rates.

Thus there is the temptation to sell
francs and yen and buy currencies where
interest rates are higher.

Depending on the precise circumstances
the most popular carry trade varies
from year to year.

Most recently Taiwan ranked high in
this regard.

Lower inflation and lower interest rates
also take a bit of pressure off the
Yuan and reduce the risk of a trade war.

Chinese industrial growth has been
spectacular for decades.

And the Chinese economic growth
miracle is coming to an end.

As Forex traders we are interested in the
new Chinese normal and the yuan.

Will money poured into infrastructure
and a push toward higher quality
products save China from a hard
landing?

How will the new Chinese normal and
the yuan work out?

Lower growth targets are simply a
reality as Chinese industrial production
and imports suffer.

The Guardian reports as China lowers
growth target to 7%.

The fact of the matter is that China is
probably fudging its growth figures and
will probably see growth similar to
Europe and North America by the next
decade.

Lower inflation in the USA and a very
slow rising of interest rates will help
Trump avoid tagging China as a
currency manipulator.

A top outside adviser to President
Donald Trump said the U.S. probably
won’t name China a currency
manipulator in a report due this month

a move that would break a key
campaign promise and another sign of
capitulation on the administration’s
tough trade talk.

The Treasury is expected to release its
first currency report under Trump this
month.

The department is required by law to
report to Congress twice a year on
whether America’s major trading
partners are gaming their currencies.

While candidate Trump complained
about Chinese currency manipulation
he was in fact a decade out of date.

Now he needs China to help rein in
North Korea and China is fighting to
raise the value of its currency.

Meanwhile the USA is drifting away
from inflation.

Dollar Falls As Inflation Risk Recedes

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