While tensions between the US and China have increased dramatically over the last week, it seems that president Trump is placing his focus a little closer to home. Trump has once again been highly vocal in criticising the Fed, which he believes should be easing monetary policy at a higher rate.

Trump Tweets Again

Using his preferred communications channel of Twitter yesterday, Trump  wrote:

Trump Disappointed With .25% Cut

This latest verbal attack on the Fed comes in the wake of it cutting rates by .25% in July as Trump felt the Fed should have cut by a higher margin. However, this is just the latest in a string of comments which Trump has made both on Twitter and during interviews over the last year. Trump maintains that the trade war with China can be won if the Fed is willing to ease policy at a higher level in order to boost liquidity and buffer the economy. However, many have criticised Trump for attempting to pressure the Fed into making policy decisions.

Former Fed Chairmen Speak Out

Indeed, earlier this week, four former chairmen of the Federal Reserve issued an open letter in the Wall Street Journal calling for the independence of the Fed to be maintained. The letter, which was signed by Paul Volcker, Alan Greenspan, Ben Bernanke and Janet Yellen, said “As former chairs of the board of governors of the Federal Reserve System, we are united in the conviction that the Fed and its chair must be permitted to act independently and in the best interests of the economy, free of short-term political pressures and, in particular, without the threat of removal or demotion of Fed leaders for political reasons.”

Fed To Ease Further?

While the Fed cut rates by .25% at its last meeting, Powell downplayed the likelihood of further easing saying that the move was more of a “mid cycle rate adjustment” rather than the start of a lengthy easing process. However, the Fed might soon be forced into further easing given the global developments taking place. With three central banks over the last week cutting rates at a higher-than-expected levels and trade war tensions continuing to grow. Global yields have plummeted since the latest outbreak in trade tariffs between the US and China. With fears over the prospect of trade talks between the two nations breaking down again, the outlook for yields is bearish.

Technical Perspective

The recovery in risk appetite since the equities crash on Monday has seen the S&P trading back up to retest the underside of the broken bullish trend line from 2018 lows. Above here, the structural 2941.28 level offers the next resistance to watch. While the trend line holds, focus remains on a further roll over with the 2738.79 level the next major support to watch.

Please note that this material is provided for informational purposes only and should not be considered as investment advice. Trading in the financial markets is very risky.