Trump tweets smash two pillars of economic policy.

Jabs at Fed, and currency accusations

President Donald Trump is showing that no economic-policy tradition is sacred in his pursuit of faster growth and lower trade deficits.

The U.S. president on Friday accused China and the euro area of manipulating their currencies, and complained that a rising dollar is blunting America’s “competitive edge.” In a reference to interest-rate increases by the Federal Reserve, Trump added, “tightening now hurts all that we have done. Debt coming due & we are raising rates —Really?”

In the flurry of tweets, Trump smashed two pillars of U.S. economy policy over the past quarter-century. Presidents have traditionally delegated the nation’s stance on the dollar to the Treasury secretary, who usually hews to the position that a strong dollar is good for the economy. Past presidents have also steered clear of commenting on U.S. monetary policy out of respect for the Fed’s independence so the path of borrowing costs doesn’t move with the whims of politicians.

The question is whether Trump’s remarks mark the beginning of a new era of greater intervention, one in which the president and his cabinet feel free to weigh in on economic issues that were traditionally seen as outside the political domain.

In the meantime, currency traders may need to pay closer attention to the president’s Twitter feed. The U.S. dollar, which has strengthened more than five per cent since the middle of April, fell after Trump’s remarks. The Bloomberg Dollar Spot Index slid as much as 0.74 per cent, its biggest intraday decline since March, before paring its loss to about 0.6 per cent.

“It breaks with the consistency in the dollar messaging that we’ve had over the last 25 years, which has provided a strong backstop for market-determined exchange rates,” said Shaun Osborne at Scotiabank in Toronto. “At the very least, it injects uncertainty into the markets. If we see a consistent drumbeat on this from the president, it probably is going to weigh on the dollar.”

Trump’s dismissal of economic-policy tenets shifts attention during a week when he’s facing growing pressure over his relationship with Russian President Vladimir Putin and his lukewarm support for the finding by U.S. intelligence agencies that Russia meddled in the 2016 election.

In the short term, the president’s jawboning could affect everything from his trade war with China to the G20 consensus on currencies.

Treasury Secretary Steven Mnuchin headed to Buenos Aires on Friday for two days of talks with his G20 counterparts, where he will likely face questions about U.S. dollar policy. At their last meeting, G20 finance chiefs stuck to their commitment to avoid devaluing their currencies for competitive purposes.

The Trump administration’s own fiscal policy may be contributing to the strong dollar and the nation’s growing trade deficit, said Mark Sobel, a former senior Treasury official who left earlier this year, after serving as U.S. executive-director at the International Monetary Fund. The IMF projects the U.S. trade deficit will widen as tax cuts and spending increases enacted this year stoke demand for imports.

The view that China and the euro area are manipulating their currencies contradicts the Treasury’s own currency report, which found in April that no major U.S. trade partner is gaming its exchange rate.

DEBT COMING DUE & WE ARE RAISING RATES —REALLY?