Well, just one day after the FED decision to cut rates in a midcycle correction of interest rate policy, instead of a new easing cycle, and after the U.S and China agreed to continue their talks in September to overcome the current trade war, Trump decided to impose a fresh round of tariffs that will target the remain $300 billion of imported products from China, which were safe from the extra costs.
Photo by Chuttersnap.
So, was that move really about forcing China to make a deal? after both sides agreed that this week talks were productive? or was it a way to force the FED hand in cutting rates more aggressively in the future, following the U.S President tweet accusing Jerome Powell of “letting him down”? Let’s keep in mind that consumer sentiment is the main driver for the current resilience in the U.S economy, and consumer confidence gets a massive boost with Wall Street hovering around record highs, which means maybe a market correction will affect the economic numbers in a way that will effectively drive Powell to cut rates next month, despite the two dissident members that did not vote in favour of a lower rate last Wednesday.
In any case the market has a lot to digest in the next few trading days but so far the initial reaction is quite bearish.
