Trump blasts Draghi, China for weak currencies

Trump took to Twitter to blast the European Central Bank president. (Bloomberg pic)

LONDON: US President Donald Trump accused the euro area and China of weakening their currencies to gain an economic advantage, calling out the European Central Bank president for pledging monetary stimulus just as Federal Reserve officials prepared to meet in Washington.

“Mario Draghi just announced more stimulus could come, which immediately dropped the euro against the dollar, making it unfairly easier for them to compete against the USA,” Trump tweeted on Tuesday. “They have been getting away with this for years, along with China and others.”

Trump’s Twitter post came hours before the Federal Open Market Committee is scheduled to start a two-day policy meeting and not long after Draghi said at the institution’s annual forum in Sintra, Portugal, that “additional stimulus will be required” if the economic outlook for the 19-nation euro area doesn’t improve.

The euro fell on the comments and was down 0.2% to US$1.1193 as of 1.04pm in London. The Stoxx Europe 600 is up 1.2% today, first gain in three days. Benchmark indexes in Germany and Italy rose the most in two weeks. US stock futures held their advances after the president’s tweet.

‘Mario D!’

In a follow-up tweet, Trump pointed to investors’ response to Draghi’s comments, saying “European Markets rose on comments (unfair to US) made today by Mario D!”

While Trump didn’t specifically mention the Fed in the two tweets, he’s been unhappy with his pick for Fed chairman, Jerome Powell. The US central bank has been a target of Trump’s wrath for the better part of a year because the president views the Fed’s policy rate as too high.

While no rate move is expected as Fed policy makers gather Tuesday and Wednesday, economists and investors generally agree it will cut borrowing costs this year. The last two times the Fed began an easing cycle, in 2001 and 2007, it opted for a half percentage-point move over a quarter point adjustment.

Trump’s allegation adds a potentially contentious issue for a summit next week of leaders who preside over more than three-quarters of the global economy. His suggestion that China and the euro area are deliberately aiming for weaker exchange rates against the dollar underpins his broader view that big US trading partners have been competing unfairly to the detriment of American workers.

G-20 finance ministers and central-bank governors have pledged to “refrain from competitive devaluations and will not target our exchange rates for competitive purposes.”