Asian stocks were capped and the dollar dipped on Tuesday after US President Donald Trump accused China and Europe of manipulating their currencies and said he was "not thrilled" with the Federal Reserve for hiking interest rates. In an interview with Reuters, the president said he was not thrilled with the rate hikes under new Fed boss Jerome Powell, repeating comments made last month about the bank's tightening measures.
Trump claimed during his speech that Powell is a fan of "cheap money" yet continues to raise rates.
"Most Fed-watchers are of the view that Powell is emphasising the need for financial stability and with a positive United States economic backdrop is obliged to tighten policy".
American presidents have rarely criticised the Fed in recent decades because the independence of the Fed is seen as important for economic stability.
Trump has departed from this past practice and said he would not shy from future criticism should the Fed keep lifting rates.
As we noted in the recap to yesterday's FOMC minutes, this week's marquee event for the USA economy was always going to be Fed Chairman Jerome Powell's speech at the Jackson Hole Symposium, which takes place at 10:00am ET.
Trump's efforts to use import tariffs to force concessions on trade from China and other countries also creates potential challenges for the Fed, Stein said, because while the tariffs can boost prices, they may also lead to slower economic growth.
"I should be given some help by the Fed", Trump said.
"We're negotiating very powerfully and strongly with other nations".
The Fed has raised interest rates twice this year already and is expected to do so again next month with consumer price inflation rising to 2.9 percent in July, its highest level in six years, and unemployment at 3.9 percent, the lowest level in about 20 years.
"Dealers are optimistic about the trade talks between the U.S. and China, despite the less cheery tone from Washington DC and Beijing", said market analyst David Madden at CMC Markets UK.
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.
A Fed spokesperson declined to comment.
"In short, we expect Powell's speech to reiterate the point that the Fed remains on course to move policy toward a neutral setting, relying on the data to provide clues as to exactly where neutral may be", Ryan said.
Powell took over as Fed chief earlier this year.
Each of the major indexes, however, dropped just modestly as the week of continued legal woes for President Donald Trump has continued to not play a big part in the market's daily action. "If you look at the transmission from economic growth to earnings growth to shareholder returns, it's strongest in the USA, it's ok in Europe and pretty weak in EM", said Goldman's Kilmurray, who has been underweight emerging markets for five years.