Tuesday, January 31, 2017

Gold soars up $20 and dollar falls as President Trump brings Europe into the currency war

After spending the latter stages of his candidacy prior to the inauguration going after China's 'manipulation' of the Yuan, President Donald Trump has shifted gears and is now challenging Europe and their policies which he alleges are keeping the Euro undervalued, and affecting fair trade.

On Jan. 31 Peter Navarro, the top trade adviser and member of the Trump Administration, went directly after the heart of the EU's trade alliance by singling out Germany as the primary instigator in the continent's use of monetary devaluation policies to achieve unfair trade advantages.

The Trump administration just fired the first shot in the US-European currency, and thus trade, wars when Trump's top trade advisor Peter Navarro accused Germany of using a “grossly undervalued” euro to "exploit the US and its EU partners", the FT reported noting the comments are "likely to trigger alarm in Europe’s largest economy." News of the statement sent the EURUSD surging and the dollar tumbling to fresh 2 month lows. 
Navarro, the head of Mr Trump’s new National Trade Council, told the Financial Times the euro was like an “implicit Deutsche Mark” whose low valuation gave Germany an advantage over its main partners. While not necessarily novel - Germany has often been accused of being the biggest winner from a weak euro at the expense of peripherla Europe - his views suggest the new administration is focusing on currency as part of its hard-charging approach on trade ties, according to the FT. Furthermore, virtually assuring a deterioration in US-German relation, and in a departure from past US policy, Navarro also called Germany one of the main hurdles to a US trade deal with the EU and declared talks with the bloc over a Transatlantic Trade and Investment Partnership dead. - Zerohedge
In response to the allegations, gold and silver soared to their highest intra-day move of 2017 as the yellow metal climbed back over $1200 per ounce on an early move of over $20.

Live New York Gold Chart [Kitco Inc.]

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