Joseph Trevisani on the Dollar & Euro If the Fed Cuts Rates | Stock Trade Ideas


Welcome to trade ideas. I’m Jake Merle sitting down with Joseph Trevisani of FX Street. Joseph great W back on the show Thanks for having me. So today we’re gonna be talking about the Fed We just have powell give his testimony and we also at the end of the month have the FOMC meeting where they’re you know Might cut rates, correct? And so we wanted to get your view of pals Testimony and how you see monetary policy affecting markets in the weeks and months to come the Fed is in a very interesting position I think they are considering a rate move Quite seriously, in fact, they have set it up. So With their devotion to transparency. They don’t really have a lot of choice The markets have fully priced it in so it’s something that they need to do the Fed is not going to want to create the kind of Market repositioning that will happen if they don’t cut rates at the end of the month on the other hand They don’t have a very strong economic Rationale at least not one based in the United States Traditionally if you have an economy that’s growing somewhere between two and three percent that seems to be steady and stable at that level you we really wouldn’t consider cutting rates if you have inflation running somewhere between one and a half and 2.1 2.2 percent You also wouldn’t normally consider cutting rates if you have a very hot job market which we do Yet there’s really not Overriding wage inflation you wouldn’t consider cutting rates, but the Fed is going to do this so we have to look and I think they found a not maybe not more acceptable but a good Economic rationale almost almost a socio-economic rationale what? Mr. Powell said was that the Wages were not growing really fast enough to support inflation to drive inflation higher and that’s correct However wages are improving at a better rate than they have and also Disposable income at a better rate than they have at the best rate they have since the recession and I think that’s the focus because if the expansion slows down or stops Or goes into a recession or a mild recession you will lose all of that wage pressure And as he said a number of times That wage pressure is benefiting classes in society that Have been left out for many years and it has a farther reach Than it has before meaning two people who had not been employed or marginally employed. So those are rather large Socio-economic benefits ones that fit exactly in the feds mandate from Congress for Full employment. So I think the focus on that to keep the expansion going of in effect to take out an insurance policy on The expansion is what the Fed is aiming at and I pretty sure they’ll do it But do you think rising wages will directly translate into rising inflation? Well, that’s the interesting another interesting thing and one of the and I think the house testimony congresswoman from New York Miss Cassio Cortez Brought up the Phillips curve, which is a very accurate question Surprisingly enough I suppose politically at least Larry Kudlow the president’s economic adviser praised her for it and the idea is one which seems logical curve dates from The 1950s later zero 60s and it it postulates that rising Employment a tighter labor market falling unemployment will naturally enough force employers to offer wages higher wages this translates overtime in to Inflation wait both wage inflation and then of course price inflation. It’s one it has a seductive logic to it It seemed kind of makes sense. It hasn’t really worked out terribly. Well empirically but now because the intent and the environment the global environment that you’re in in the 1950s the 1960s really did not Have a great deal of all offshoring people didn’t move their Factories to Malaysia or to Indonesia or to China? So the logic was at least domestic Now the global market means there’s also a global competition for wages in global competition for labor. So one of the great puzzles Well, it’s actually not a puzzle. But from Fed policy point of view, which is based on monetary policy You increase the money supply you get inflation hasn’t worked. If you look at the inflation record since the Recession and the amount of money that was pumped into the economy Through lower rates and also through conduct quantitative easing Got very little inflation the link. However, it was what functioning in the past is now almost completely broken So that was her point. And so I think that is true. So the Fed can lower rates which will Give a boost a benefit of support to the economy without worrying a great deal About inflation. I think that was both of their points surprisingly in agreement And so you think at the upcoming meeting in July, we’re gonna get a twenty five bits cut So I think we will I think we will, you know if they’re going to take out an insurance policy It’s almost more of a psychological insurance of policy for business consumer spending has held up reasonable it dipped and then it’s come back business spending and business sentiment which is one of you know, the underpinnings of the economy Has not it has fallen had stayed relatively low. I think businesses are a lot more worried about The global economy and about China and perhaps about brexit Maybe they’re gonna like Boris Johnson. I don’t know. I don’t see that but you never know then consumers are consumers are looking at low unemployment Ease of getting jobs more jobs than there are people to fill them in rising wages and low inflation So from consumer point of one know what’s not to like so but it’s the businesses that are more concerned so in a way, I think this will do more perhaps for the psychology of business because after all a Twenty five percent interest rate cut in the Fed Funds rate is really not going to do very much as far as driving Greater growth but it might drive some sentiment which in turn Could provide some more business spending so bringing this back to trading and investing? How do you see this all impacting markets and specifically the US dollar over the weeks months to come? You know the traditional view and at two weeks ago a little more the dollar took a dip when this became more credible I mean it’s been credible for a while It’s look at the futures the feud. The Fed Funds futures have been at a hundred percent on That’s a volatile measure but nonetheless it’s been at 100 percent for probably two months maybe more I’m not sure about that that they’re gonna entry they’re gonna reduce at least by a quarter So the dollar of course lower rates Dadaab in addition, you know the Treasury rates of them coming off It’s early November The Treasury rates started to fall six weeks before the Fed raised rates the last time in December they raised I think on the 19th Of December trigger rates have been falling since the eighth or ninth of November. So the Treasury had it I mean if the credit market said a very different view than what the Fed actually Did so that of course has an impact on the dollar throughout all of that The dollar has held up reasonably. Well, and in fact, it popped over 1.1 3 to the euro last week an ounce back underneath What’s going on, of course are twofold one if the Fed is worried about the global economy. So is everybody else? So if the Fed is going to start Lowering rates so is everybody else? The only people who are being resistant right now are the Canadians They also have a very strong kind of made a very strong labour economy surprisingly strong They just set an all-time record. I think for the number of jobs created in one month two months ago Why but it’s a very impressive feat. So one you’re going to get the other central bank’s looking at and Mario Draghi has said this he’s headed to retirement and he’s probably gonna get another really nice job to Christine Lagarde is going to take his position another very nice job so the other central banks are going to move to they’re gonna come with the same analysis and then come to the same reason for Doing they can lower rates do the Australian and the New Zealanders have ready done this in addition. All of the trading currencies that trade against the dollar don’t really want their currencies to Revalue to go higher Appreciably against the dollar. So there’s that pressure as well. So it’s a race to the bottom exactly So, you know, it’s it’s the standard thing. It’s what usually happens there used to get 25 30 years ago divergences in Rate policy between major central banks. You don’t really get that anymore much as the labor market has become not quite a global Phillips curve But it’s tending in that direction or at least a global market American workers really do compete Against workers in Vietnam and against workers in China and Indonesia. It’s the same thing with bank rates. They are very much in line When someone starts moving, especially when it’s the Fed because the Fed being the world’s largest You know having the most impact in a base in the world’s largest economy So you’re saying even though the Fed is about to cut rates that the dollar should actually stabilize or strengthen from here. I Think it probably will because what we what we’re seeing here are two things well on the US economy still doing better than everybody else and to the Fed rate Cut at the end of this month if it happens, it’s fully priced in everybody’s been known about everybody’s known about this Everybody’s talked about it. Everybody’s priced it in four months. Now some of the other major central banks primarily the ECB has Recently started talking about it, but there’s no move Mario Draghi said I believe that they could Lower rates. Well, they can’t actually lower rates because they’re really at zero But they could certainly do they could start up their quantitative buy more bonds. They could do whatever they were doing in the past So but that’s not at the operational level yet that they’re not actually contemplating it when that becomes something that is looming in effect Then of course, that’s a new factor in the economy a new factor in the currency equation And it would play to the dollar strength it would lower the euro, so that’s why I think it’s still possible So how much upside do you see for the dollar or how much downside do you see for the euro? Well, that’s a little difficult I mean, I’m still looking for the we’re at about one twelve and a half right now in the Euro. I’m still looking at between 105 and 107 by the end of the year. I still think that’s something that Given the currents and the trends that we’re seeing both as far as the central bank rates go and the world economy something that seems Likely and what would be the biggest risk to that thesis the biggest risk? Is that the Fed gets more worried than they are and they get and you get a move to more than one rate I mean, I think what you’re gonna get right now is One is the 25 basis point cut in at the end of this month on the 31st and then I think they’re going to move back to a a pause a neutral and see what happens if that is not the case if the the China trade issue becomes more volatile and more acrimonious and You have more tariffs on both sides That would be a risk for that because the Fed will undoubtedly respond to that By reducing rates against and so just in case things don’t go your way Would you have a stop loss in that trade for the euro? Yes, I would put it about 115 Because if you get to that point and there has been a serious Alteration in the underlying economics and the in turn I trade policy something has changed because if you look at that the currency charts They’re pretty much wandering around and have been for more than six months in a very tight range the basics Haven’t changed the fundamentals the things that drive Long-term trends in currencies and in markets as well Haven’t really changed and you know that just looking just look at the charts So if you get to 115 things have changed. Well Joseph. That was great We’ll see how it plays out in the months to come. Thanks so much for joining us Thank you very much for having me here So Joseph is bearish on the euro specifically he likes shorting it at current levels with the stop-loss at 1:15 and a target between 105 and 107 by the end of the year now is Joseph Trevisani of FX Street? And for real vision, I’m Jake Morrell You

28 thoughts on “Joseph Trevisani on the Dollar & Euro If the Fed Cuts Rates | Stock Trade Ideas”

  1. How much of these employment numbers are just people coming out of retirement or getting second jobs in order to afford their rent or save for a coming recession though?

  2. This time around – it just doesn't feel like the mid 2000s just before that crash. I was seeing construction materials changing price DAILY from 2006 – 2007, ie crazy fast price inflation in building materials. This time around – just as busy in my world, but material prices appear stable with some increase for tarriffs. This is why I think a rate cut wouldn't hurt and will probably happen – except I'm a rabid saver and am tired of lousy returns on my saved money.

  3. So after the rates get lowered we’ll see what happens. We have 2.5% to go before we get negative like other countries. Go for it. Maybe another 3 good years.

  4. Fed needs to cut rates to sustain this house of cards,, err I mean “great economy” and keep the stock market pumping higher..

    Don’t forget! We’re expecting more rounds of QE. The dollar is ripe for disaster. Stagflation anyone?

  5. Stocks up, jobs up, plenty of inflation>>> no way they will cut yet, especially since they have much less to cut going into the next recession / depression.

  6. Great interview. Good for noting AOC's questioning of the Fed chair and his response, and making the tie to the globalization of trade. Yep, that's why the link between low unemployment and inflation has been broken, and it isn't coming back so long as every American president is a neoliberal no matter how much they differ on social issues. This is a race to the bottom not just in currencies, but in entire national economies, with those who hold capital continuing to be enriched on both the up and down cycles. Inequality will naturally grow until the workers in industrialized nations have worker and environmental protections and only compete with others who face those same constraints. This goes beyond tariffs, which only hurt consumers with higher prices. If there isn't a global standard for worker rights and environmental responsibility, there cannot be a global workforce without making beggars of everyone.

  7. You are quoting fantasy statistics. Inflation is at least 10 percent. Unemployment is at least 10 percent. The Fed's cutting rates to juice the stock market and control Treasury's interest expensel

  8. Joseph Trevisani is wrong! It is time for long on EUR/USD (maybe till 1,150-1,175)
    1. USD is negative connected to global CPI – nowadays CPI is rising worldwide and it is bearish for USD.
    2. Prices of commodities and agriculture products are rising – bearish for USD.
    3. Emerging markets currencies are rising against dollar – bearish for USD.
    4. Gold, silver and platinum are in the bullish mode – bearish for USD.
    5. Money is flowing more in emerging markets stocks than US stocks – bearish for USD.

  9. What does 13 trillion in negative yielding euro currency feel like against the dollar? Probably like a small pillow. The euro will not prop up the dollar

  10. I'm 5 min in and I cant stand this anymore. This douche doesn't understand the reason why we have not seen inflation is because of where the money is located. The top 1% increased their wealth collectively by trillions while the rest of us do not see any of that money. Trickle down works IF and only IF, those fuckers at the top SPEND what they bring in.

  11. Real vision fan algorythm:
    If the guy speaking doesn't shout RECESSION IS HERE!!!
    Dislike the video + comment shitshow
    Else if
    Told ya.

  12. Fed shouldn’t cut rates if they still have a backbone. Based on additional data they can cut in September plus by then QT will be close to being done. Since only 8-9 cuts of .25% are available Fed should hold on to them unless absolutely necessary.

  13. The collapse of the bond market will force the fed to raise rates eventually and the banks will fail again, followed by hyperinflation due to quantitative easing. Also it’s funny to see supposed capitalists defending a central bank and money printing, all while having the nerve to criticize socialists like AOC. Wall Street and big corporations are the biggest socialists in the country.

  14. How can any sane economists say their is no inflation,I watch finance constantly and they all say the same thing,they must be living under a rock.You can't use the lying corrupt government numbers cpi totally bs.Inflation has been running 6 to 10 percent per year.

  15. There is no global market for labor and wages are defined within the borders of a nation state that myth is absolute garbage
    That message not only displacing an making people unemployed literally killing people

  16. Whatever we do at this point makes little difference. The cat is out of the bag, and the chickens are coming home to roost. That can only mean the wolf is at the door.

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