Business / #ForbesBusiness

July 23, 2018,   5:21 PM

Could There Be An Impending Currency War?

Farah Al-Toukhi


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In recent news, United States President Donald Trump publicly criticized the US Federal Reserve. The Federal Reserve had announced a new tightening policy, which Trump is seemingly against saying “the United States should not be penalized because (they) are doing so well”. In light of these remarks, the Dollar's value decreased in the midst of uncertainty, threatening to push further into a full-out currency conflict.

According to Hussein Sayed, Chief Market Strategist at FXTM, the increasing interest rates are neither in the benefit of U.S households nor the currency market.

"After all, higher rates mean increased costs of borrowing, higher mortgage interest payments and less incentive to spend," says Sayed. "However, the Fed cannot base its decision on short-term political ambitions, as letting inflation run out of control will be much more damaging in the long run."

In addition to this effect, Trump's latest comment could affect the state of the of the central bank, which is a huge indicator of market confidence. "Fed Chair Jerome Powell will proceed with the tightening process, but there is a chance that hikes will become less gradual if the President continues to pressure the central bank," adds Sayed.

This all currently plays out in light of the ongoing trade war between the U.S, China and the EU. Whether this could push even further for currency trouble is currently unclear.

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