The Trade war fire has been revived by US President Donald Trump, as the FED lowered just a quarter of point the interest rate. That was after the US President complained about that being too little to fight the assumed currency wars by Europe and China.
….As usual, Powell let us down, but at least he is ending quantitative tightening, which shouldn’t have started in the first place – no inflation. We are winning anyway, but I am certainly not getting much help from the Federal Reserve!
— Donald J. Trump (@realDonaldTrump) July 31, 2019
That day the stock market fell while the US dollar jumped up in a bullish spike that drove the US DXY Index to a new 98.93 high. On August 1 President Trump found a solution to the US Dollar valuation and at the same time heat the US vs China war. That came by adding a 10% tariff to $300 billion worth of products made in China.
…during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%…
— Donald J. Trump (@realDonaldTrump) August 1, 2019
That measure created a reaction on the stock market that drove the S&P500 Index down about 3.6%, which is rather high for an index. The US Dollar Index (DXI) fell sharply from its highs and currently is in a descending trend touching the 97.7 level (-1.25%) which matched the purpose of the US President.
But, the downside of it is that the 500 biggest companies that form the S&P500 index are worth close to $20 trillion. A 3.6% drop in the S&P 500 valuation means for investors a whooping 720 billion loss in just a few days. Meanwhile, the effects of the 10% tariff over $300 billion worth goods would mean just 30 billion for the US Treasury.
The Chinese renminbi was weakened this Monday in a likely move by the Chinese government to challenge Donald Trump, although he didn’t seem too impressed and used this information to boast that the US consumer won’t pay the tariff on the Chinese products.
Things are going along very well with China. They are paying us Tens of Billions of Dollars, made possible by their monetary devaluations and pumping in massive amounts of cash to keep their system going. So far our consumer is paying nothing – and no inflation. No help from Fed!
— Donald J. Trump (@realDonaldTrump) August 3, 2019
Not everybody agrees with him.
“All of the U.S. tariffs have been passed to U.S. importers, U.S. retailers, U.S. consumers,” said Stephen Redding, a Princeton University economist and author of a recent study analyzing the effects of Trump’s trade war in 2018. “Somebody in the U.S. is paying higher prices.”
Cryptos and Gold Bullish
Gold and Silver are bullish, after reversing their path as investors sold their stocks and bought the precious metals as a hedge against the falling dollar.
Meanwhile, Bitcoin and altcoins are celebrating the resulting bullish surge, that many people think is the result of a safe haven effect. The Bitcoin is up close more than 10% above Friday’s prices. Ethereum, Dash, EOS, Monero and others are joining the party, while Litecoin is up 9% after its halving, that happened one hour ago.
Many think this is the confirmation of a Bitcoin will be above its all-time high of December 2017 before the end of the year. Only time will tell.