Macroscope | With a weak yuan and strong US data, Trump might have to accept a higher dollar, like it or not
Neal Kimberley says the strong American economy and a soft Chinese currency justify a case for an even stronger US dollar. Trump’s tariffs have not eroded the US trade deficit and he needs to keep an eye on the yuan
“Unprecedented Jobs Growth Streak Continues as Wages Rise”: That was how the White House trumpeted US jobs and earnings data last Friday. The currency market could conclude that such data justifies a yet stronger US dollar, including against the yuan. That might not play well in the White House but the Trump team would have to accept it.
A stronger greenback makes imports into the United States cheaper for US consumers, and partly offsets President Donald Trump’s trade tariffs that increased the prices of affected imports.
As it stands, there are few signs anyway that Trump’s trade war, and tariffs, are eroding the US trade deficit. Indeed, this deficit hit US$50.1 billion in July, a five-month high, US Commerce Department data showed. The US goods deficit with China is at a record US$36.8 billion.
As for the US jobs data, a healthy addition of 201,000 jobs across sectors except agriculture in August, a low unemployment rate of 3.9 per cent and, perhaps most importantly, an annual increase of 2.9 per cent in wages – the biggest jump since 2009 – all strengthen the case for two further interest rate hikes this year.