Deal of Century or an attempt to remove Palestine from world map

The United States believes that “Deal of Century” should create a strong barrier against Iran’s expansionism and must secure interests of US and Israel in the region. Arab countries should pay US$50 billion to US and Israeli companies with regard to Kushner’s plans and prosperity of Palestine. 

Several resolutions and agreements have been signed between Israel and Palestine since 1967 in the process of Peace Talks, the solution of two states, one government, and even confederation have been included in these agreements. In this regard, each of former presidents of the United States presented a peace plan to solve the problem and this time, it was Trump’s turn. 

The family of Donald Trump and Jared Kushner formulated and compiled the ‘Deal of Century’. It was not considered important that the differences between Palestinians and Israelis are a difference in the width of history and in the extent of ideological differences. 

In formulation of the ‘Deal of Century’ not attention was paid to the issue that resolving problem of Israel with the Islamic countries is not the problem that is confined or limited only to the United States or Israel.

From the political point of view, the issue is not even comprehensible for them, despite all international efforts and political initiatives taken in the recent decades, resolving this crisis has become more complicated with the passage of time. 

The situation in Palestine is tied with the Resolution 242 of the United Nations inked in 1967, stipulating that Israel must withdraw from the Golan Heights, Jordan River, Gaza Strip, and the West Bank. The resistance of Palestinian people, which began with the throwing of stone, has now been turned into resistance with the power of deterrence that owns pinpointing rockets and missiles. 

Even if the Palestinians relinquish their inalienable rights, the future of Bait Al Muqaddas (Jerusalem), as the first Qibla of Muslims and the Ascendant of the Holy Prophet of Islam as well as Palestinian citizenship within a ‘geographical area under Israeli mandate’ will turn the Palestinian problem from a territorial problem into an ideological and trans-regional problem. Such a situation would add to the desire Palestinians for more resistance and also would confront Israel with new trans-regional political and armed groups as well. 

Jared Kushner unveiled the plan of ‘Deal of Century’ to the representatives of Arab and European countries in Manama, capital of Bahrain on 25th June 2019. In this initiative plan, Kushner considered economic solution as ‘alternative’ of political solution for ending the conflict between the two parties, Palestine and Israel. In the opening remarks of the ‘Deal of Century’, he clearly put the value of land and territory of Palestine and its identity at US$52 billion. By insulting the Palestinians and their struggles, he called Palestinians as people who have lived without understanding what the peace means.

In the ‘Deal of Century’, Kushner defines Palestine as land and territory which is confined to a geographical area without a nation, government, army and also conceptual boundaries. Moreover, in his defined project, Kushner said that Palestine is an area in the West Bank and Gaza Strip that are connected with each other through railway. This area is supposed to be managed and administered by multinational companies whose staff is from the people of Palestine under the strict supervision of the United States and Israel. In Kushner’s plan, people of Palestine have been supposed as ‘unable, unhealthy’ people and emphasized, “We need a healthy economy and healthy people for empowering them.” 

The ‘government and accountability of the government towards people’ have been highlighted in formulation of the ‘Deal of Century’, while Palestinian land and territory and also Palestinian government have not been taken into consideration. In this Plan, it has only been emphasized that Palestine was established through foreign investment. In formulation of ‘Deal of Century’, Kushner has considered Palestinian land as a free trade zone than a state with clear-cut government, nation and identity. The “Deal of Century” is about turning the Palestinian nation and people into an Israeli-led development project. 

In Kushner’s plan of ‘Deal of Century’, share of Palestinian people in empowerment and reconstruction of Palestine has been considered ‘negligible and insignificant’. In this plan, share of Palestinian people to create equality and justice in the newly-established companies and lending facilities has been considered just $100 million out of US $52 billion that is supposed to be put available to US companies. 

The “Deal of Century” was unveiled in Bahrain Conference with US$52 billion investment of Trump’s family to resolve Palestinian problem. However, it should be considered that what achievements this plan would bring about for Palestine, Israel and other countries if the plan is succeeded. The “Deal of Century” will resolve the problem of Resolution 242 for Israel, allowing Tel Aviv, capital of Israel, to legalize its settlements with the geographical privileges it receives. Under the Plan, Israel can maintain its border security more than before. In addition, risk of outbreak of a civil war, from withdrawing the areas that are home to hundreds of thousands of Jews, will also be removed. 

From the United States point of view, recognizing Al Quds as capital of Israel and relocation of embassies of other countries to Jerusalem (Al Quds) is raised and it is not supposed that a state named ‘Palestine’ will be recognized as the capital of Al Quds. 

In Manama Conference, Kushner emphasized, “After ceding their land and territory, Palestinians can export their traditional foods, which have unique tastes and flavors, along with their handicrafts to the world markets.”

Interestingly, after the plan of “Deal of Century’ was unveiled it was even criticized by the US President Trump and Secretary of State Mike Pompeo. In media circles and public opinion of the United States, this plan has also been nicknamed as “Waste of Time”. 

Can sustainable peace be established in Afghanistan?

Afghans are hopeful that a peace deal between the Taliban and the United States can bring them closer to the end of the country’s ongoing devastation for more than four decades. This protracted state of war has resulted in loss of countless lives, massive displacement of people, particularly women and children, and destruction of infrastructure systems in the country. Taking into account the price Afghans have paid and continue to pay, it seems they would eagerly welcome and accept any deal that can put an end to the ongoing war, but is that really the case and is it that simple too?

For many Afghans, peace is not simply the end of war between Taliban and the Afghan army, working in the shadow of US-led troops.

They want equal rights for all citizens as described in the constitution. They also want a governance system where institutions are capable of protecting their rights. While the broad contours of the US-Taliban deal suggests a phased withdrawal of US forces, they also want a commitment by Taliban to reject internal and external militant groups operating in their territory. Though, the negotiations have been going on for months, the details remain unknown.

Afghans want withdrawal of US troops to be complimented by efforts to address the concerns of women, children, minorities, internally displaced communities, and returnees. The agreement must also include provisions to ensure equal participation of all without discrimination based on ethnicity, gender, language, religion, political, economic and social affiliations.

Since direct talks between the US, led by Special Representative for Afghanistan Reconciliation Zalmay Khalilzad, and Taliban started in late 2018, a number of experts and political analysts—many of whom are not Afghans—have said they believe Taliban have changed or reformed. They say Taliban leaders in Doha have assured them that they recognize that today’s Afghanistan is not the same as in the late 1990s when they ruled the country. However, in the eyes and experience of millions of Afghans, the Taliban’s ideology remains very much unchanged. Is there anything that can be done to bridge the confidence deficit?

After 18 years of fighting Taliban and US administration appears ready for troop withdrawal. Yet, even as the US negotiates with Taliban, the group continues to engage in terrorism and kill civilians indiscriminately. The question is whether Taliban—at both the leadership and operational levels—have the capacity, competency, and willingness to put the public good before the group’s interests. Even if the US-Taliban deal and an eventual peace agreement brokered by intra-Afghan talks results in Taliban joining the country’s political system, terrorism will remain a challenge for the country.

Countering terrorism requires more than a military response. It requires integrated political, social, and economic strategies. Ultimately, Afghanistan can only tackle its terrorism challenge when it has achieved political stability, social equity and economic growth, all of which are interconnected. There is concern that withdrawal could lead to a sudden stop of humanitarian and development aid, which would be catastrophic. As the US and international coalition troops drawdown, the international community must remain engaged to help Afghanistan build a more peaceful, inclusive society. That is the only way to reduce the high levels of violence the country has experienced for decades.

Is the international community, particularly the US, willing to stand by Afghans after the withdrawal of troops? Many Afghans fear that after the signing of a peace deal between the US and Taliban, the US will abandon the country, leading to chaos and civil war much like after the withdrawal of Soviet troops some 30 years ago. An abandoned Afghanistan could be exploited by violent extremist groups around the world and bring Afghanistan right back to where it was in 2001.

Lackluster global currency markets

Investors do not seem keen in buying EUR because they are worried about the political situation in Italy, the possibility of a recession in Germany, the prospect of aggressive easing from the European Central Bank and the ongoing risk of more tariffs from the US on Chinese goods.  This week, Italy's Prime Minister Conte resigned, turning crisis into chaos for the Eurozone's third largest economy.  Of all the EUR troubles, Italian politics has the most limited impact on the currency.  Europe is no stranger to Italian political uncertainty (they just had elections in 2018 and who can forget Berlusconi's countless scandals) and this crisis was a long time coming. Instead of rising, Italian bond yields fell because investors are hoping that the new government will be more pro-business. Talks have already begun to form a majority in Parliament, which could hopefully pave the way for a smooth transition for Matteo Salvini, who is widely expected to become the new Prime Minister.  

Recession on the other hand is a serious risk for Germany. According to the Bundesbank, Germany's central bank, the country could very likely fall into a technical recession in the third quarter. Last week they predicted that GDP could continue to fall slightly. Growth has been weak for the past year as the country posted growth in only one out of the last four quarters. Unlike Italy, Germany is a serious problem for the Eurozone. As the region's largest economy, their slowdown will be felt across the continent. Although, it became evident last week that German and EZ PMIs rose in the month of August, the uptick in activity won't stop the European Central Bank from easing.  Industrial production is weak, investor sentiments are bearish and there's a good chance that the upcoming German IFO business confidence index will decline as well. Auto sales have taken a big hit and fears of further tariffs along with a disorderly Brexit are mounting.  Just this past week, the US lawmakers urged the Trade Representative's Office to hold off imposing new tariffs on European olive oil. In November, the Trump Administration will decide whether to impose duties on European autos.  With all of these risks in mind, the European Central Bank will have no choice but to ease next month and they could deliver a bigger than expected stimulus package.  This prospect will keep EUR/USD under pressure.   

Meanwhile the US Fed is really going out of its way to downplay the need for easing.  According to the FOMC minutes, most Fed officials saw the July rate cut as a mid-cycle adjustment and not the start of an aggressive easing program.  Since then comments from policymakers such as Mester, Rosengren, George, Daly and Harker suggest that they may not support another rate cut.  On Monday, Rosengren said the US is in a good spot right now and there is no need to take action if their outlook stays on track. He stressed that the Fed doesn't have to ease simply because other countries are weak. On Tuesday, Fed President Daly said she supported the July cut but sees the labor market as strong and consumer spending. Fed President George seems to agree - she said just this morning that she's not ready to provide more policy accommodation without seeing evidence of a slowdown. Like Rosengren, she described the economy as in a good place. Fed President Harker admitted that he reluctantly supported the July rate cut and felt that "we should stay here for a while, see how things play out."  So while President Trump wants the Fed to be proactive and has taken every opportunity this week to lay on the pressure, US policymakers don't seem to be onboard with the idea.  If that's true, it would be significantly misaligned with market expectations as Fed fund futures price in 100% chance of easing next month.  Now it is all up to Jerome Powell to clear the air. He is scheduled to talk on Friday and the tone of his speech could determine the direction for USD in the weeks ahead.

Israel’s presence in US coalition in Persian Gulf can further escalate tensions in the region

Israel’s recent interest in joining the United States self-proclaimed maritime coalition is expected to further escalate tensions in the Persian Gulf region.

Iranian Foreign Ministry Spokesman Seyyed Abbas Mousavi said the Islamic Republic considers possible Israeli presence in a US-led coalition in the Persian Gulf as a clear threat to its national security and reserves the right to counter it within the framework of the country's deterrence and defensive policy.

Earlier, Israeli foreign minister had said that the regime would be part of the US-led coalition to “protect the security of the Persian Gulf”. The minister claimed that Israel was determined to stop “Iranian entrenchment” in the Middle East region and strengthen Tel Aviv’s relationship with Persian Gulf countries.

Israel’s wish to join the coalition has multiple objectives which include:

1. Containing Iran; one of the main reasons behind the Israelis’ interest in joining the coalition is to seize the opportunity to make their wish come true to contain Iran in the Persian Gulf.

2. Accompanying the US in its anti-Iran policies to boost such hostilities.

3. Ensuring the Arab countries’ security under the US protective umbrella could have other objectives.

4. The Minister has expressed hope that his country may manage to sign agreements on complete normalization of ties with the Persian Gulf Arab states as the regime’s first step.

5. The possible presence of Europeans, including France and Germany in the coalition will be equal to the violation and complete death of the Iran nuclear deal.

6. The Israelis’ presence in the Persian Gulf will foment the tensions and add to the volatility of the region, and will be considered as an element threatening Iran’s security.

7. The presence of the mentioned coalition, just like any other trans-regional coalition, is basically against the United Nations Charter.

8. By joining the collation, the Israelis seek to divert the attention from its occupation, which is in fact the main reason behind the region’s conflicts.

9. Linking the Persian Gulf security to that of the Bab-el-Mandeb in line with the Saudis’ plans is aimed at curbing Iran’s regional policies and engaging other international players in the regional developments.

10. Establishing a coalition with the leadership of the United States basically means the provision of the grounds for triggering a war in the region.

11. Although the Arab front that had worried Ben-Gurion has been eliminated due to some Arab ruler’s parallel policies with the Israelis, the Resistance Front is still making the regime lose sleep.

12. Israelis presence in this coalition will be a clear declaration of war against the Islamic Republic.

"Regional states responsible for Persian Gulf security", says Iranian Foreign Minister

In a meeting with his Qatari counterpart Mohammed bin Abdulrahman bin Jassim Al Thani in Doha, Iranian Foreign Minister Mohammad Javad Zarif said that regional countries, and not foreign forces, are responsible for security in the Persian Gulf region.

“Foreign forces only cause insecurity in the region,” Zarif said as the United States called on European and Asian countries to join a Washington-led maritime force to secure safe shipping in the Strait of Hormuz which connects the Persian Gulf to the Sea of Oman. So far, only Britain and Israel have responded positively to the US call.

Zarif said, “Tehran attaches great importance to consultations on regional developments”. Qatari foreign minister highlighted the two countries’ role in protecting regional peace and called for expansion of cooperation in promoting dialogue to settle problems in the region.

Earlier, German Foreign Minister Heiko Maas said in a press conference on July 31 that his country “would not participate in the mission the United States plans to form.”

A German government spokeswoman also said on August 5 that Chancellor Angela Merkel and the whole German government do not see Germany taking part in a US-led naval mission in the Strait of Hormuz.

“The chancellor does not see a participation in a US-led mission in the current situation and at the current time - everyone in the German government agrees on that,” a government spokeswoman told a news conference, according to Reuters.

Madrid and Tokyo have also rejected an official request from Washington to participate in the naval coalition.

Spanish newspaper El Confidencial said on August 1, Madrid had received an official request from the United States to participate in these forces. However, the same sources said that “the Spanish government has currently no intention to participate in joint US-led forces,” Middle East Monitor reported.

Japan’s Mainichi Shimbun also reported that Tokyo won’t send ships to join the US-led maritime force.

Hossein Naqavi Hosseini, spokesman for the Majlis National Security and Foreign Policy Committee, said that the US coalition would only foment insecurity in the region.

In phone conversations last week, Iranian Defense Minister Amir Hatami discussed the security situation in the Persian Gulf region with Kuwaiti, Qatari and Omani defense ministers, warning about formation of military coalition in the Persian Gulf under the US leadership.

“Military coalition which the United States seeks to form under the pretext of the shipping security will just cause insecurity in the region,” said General Hatami.

He added, “We consider ourselves committed to maintain security in the region, especially in the Persian Gulf region. The Islamic Republic of Iran has spared no effort in maintaining security for navigation in the Persian Gulf, Strait of Hormuz and Sea of Oman. We believe that regional security must be maintained by the countries in the region.”

He noted that the regional countries should enter constructive talks in this respect. The defense chief blamed the US as the main culprit behind insecurity in the region. 

Pointing to Israel’s decision to join a US-led coalition in the Persian Gulf region, Hatami said, “Such probable action will be very provocative and can cause catastrophic consequences for the region.”

Mehran Kamrava, professor and director of the Center for International and Regional Studies at Georgetown University’s School of Foreign Service in Qatar, has predicted that US-led coalition to fail.

“This latest attempt, to create a new military coalition, appears to be part of yet another attempt by the United States — uncoordinated and without a long-term strategy — to maintain a military presence in the Persian Gulf and to share the costs of doing so. It does not appear to be heading for any meaningful success,” Kamrava told the Fars news agency in an interview published on August 12. 

Who will emerge victorious in Sino-US trade war?

At the beginning of 2017, Donald Trump, President of United States tried to contain Beijing by restrictive economic policies. At the time, he stated that US$346 billion US trade deficit was due to imbalanced trade with China. In year 2019, this deficit has reached US$419 billion, which shows well that Trump's economic policies toward Beijing are not yielding positive results.

China's stoppage of US agricultural products and imposition of reciprocal tariffs on American products indicate that this Asian economic super power does not intend to surrender to the US. In such circumstances, there will be no opportunity for President Trump and his companions to maneuver. Many US economic and policy analysts believe that in year 2020, China can hurt Trump in the re-election. It is already evident that China has become a symbol of America's economic and political failure in the world.

Lately, Bloomberg has reported that the ups and downs of asset prices on any given day are being determined, more and more, by the words and actions of three men. First, of course, is Donald Trump, who has rediscovered his power to send markets soaring—or into a tailspin—with less than 280 characters on Twitter. Then there’s U.S. Federal Reserve Chairman Jerome Powell, who repeatedly finds himself on the receiving end of nasty Trump tweets for abiding by his mandate to do what’s best for the U.S. economy, which isn’t necessarily always the same thing as what’s best for Trumph. And in Beijing, it’s Xi Jinping, the president of China who sits atop a Communist Party in which politicians and central bankers famously sing from the same hymnal, at least when the audience is outside observers.

With each of these collisions, the fragility of the global economy and markets is exposed. It seems increasingly possible that something big and important is broken. Investors who’d believed Sino-U.S. relations were stabilizing, if not improving, were caught on the wrong foot when tensions abruptly escalated. The prevailing assumption that President Trump won’t allow the trade war to continue through the 2020 presidential campaign season is being reconsidered, as the two sides appear further apart than ever. Economists at Goldman Sachs Group Inc., no longer expect a trade agreement before the election and see the Fed cutting its benchmark interest rate two more times this year in an effort to counteract the economic damage that will be done by the impasse.

A question being openly debated on Wall Street is whether lower borrowing costs will be enough to fend off a recession. There signs that economic activities in the United States are shrinking. In Europe, whose factories are caught in the crossfire between China and the US, manufacturing barometers already point toward recession. Trade war being converted into currency war—in which countries race to devalue to get a competitive edge for their exports.

Other disturbing signs are could US sell F-16 fighter jets to Taiwan? Is Washington supporting anti-Beijing protesters who’ve paralyzed Hong Kong this summer? And what could be at risk among more than a quarter of a trillion dollars of US investments in China since 1990?

All these questions are arising at a time when Wall Street’s vacation calendars are jammed and markets seem especially easy to rattle. Evidences of stock market volatility rose in August, some of the ugliest collapses in equities market over the past decade have occurred in this month.

The recent rush into safe havens sent gold to a five-year high and triggered a rally in Treasuries that pushed 10-year yields to their lowest since Trump was elected in 2016. At the same time, rates on three-month Treasury bills were higher than those on 10-year bonds—a phenomenon known as a yield-curve inversion that’s widely considered a reliable warning of an impending recession. The lower long-term yields signal that markets expect interest rates to come down in response to weak economic growth.

With each of these collisions, the fragility of the global economy and markets is exposed. It seems increasingly evident that something big and important is broken. Investors who’d believed Sino-US relations were stabilizing, if not improving, were caught on the wrong foot when tensions abruptly escalated.

The prevailing assumption that President Trump won’t allow the trade war to continue through the 2020 presidential campaign season is being reconsidered, as the two sides appear further apart than ever. Economists at Goldman Sachs Group no longer expect a trade agreement before the election and see the Fed cutting its benchmark interest rate two more times this year in an effort to counteract the economic damage that will be done by the impasse.

 According to a CNBC report, a trade war with China hasn’t tarnished his image as a champion for an unlikely group: farmers and ranchers. Farmers are one of the most visible casualties of the Sino-US trade war, which escalated sharply lately as both sides landed blows that could hold potentially devastating consequences for US agriculture, yet they appear to be sticking by Trump. More than 75% of farmers had voted for Trump in his successful campaign against Democrat Hillary Clinton in 2016. They are still sticking by him because they consider Trump a better option as compared to those running presidential race.

Iraq Iran considering removing US currency from bilateral trade

Iraqi Ambassador to Iran Sa’d Javad Qandil has lately said that his country and Iran are considering mechanisms to use local currencies in their bilateral trade to reduce reliance on the currency of United States. The two neighbors are holding talks to find the best way to facilitate their financial transactions, the ambassador noted.

The Iraqi diplomat once again reiterated his government's clear stance against the unilateral sanctions imposed by United States on Iran, saying that such restrictions are against the international rules and regulations. Noting that the bilateral trades between Iran and Iraq have not been affected by the sanctions, Qandil expressed his country's readiness to increase the level of cooperation with Iran in various economic spheres.

Iraq is currently Iran’s biggest trade partner and the two countries have been taking significant steps to improve their mutual trade over the past few years. In early February this year, central banks of Iran and Iraq reached an agreement to set up a payment mechanism to facilitate banking ties and boost trade between the two countries.

In the meeting, Governor of central bank of Iran, Abdolnasser Hemmati, who visited Iraq to discuss expansion of banking relations, expressed hope that the trade volume between the two neighboring countries would increase even more.

In early May, officials from the two countries held a meeting in Tehran to discuss establishing an Iran-Iraq trade committee.

According to Iran’s Trade Promotion Organization (TPO), the two sides discussed several issues including joint investment and establishment of industrial zones, facilitating the transit of goods, facilitating business travels, organizing pilgrimage and health tourism, as well as solving the existing problems regarding mutual trade.

Iran’s exports to Iraq have increased by 37% in the last Iranian calendar year and the two neighbors have it on agenda to boost their mutual trade to $20 billion by 2021.

Is US Federal Reserve losing control of gold price?

The price of physical gold has lately surpassed US$1,510/oz and likely to remain on upward trajectory in the near future. Efforts are often made to bring the price of precious metal driven down, but it recovers quickly and moves on up. Analysts either don’t have any plausible explanation or are too afraid to talk the truth.

It is not a secret that many central banks around the world have been converting their dollar reserves into gold, which reduces the demand for dollars and increases the demand for gold.  Existing stocks of gold available to fill orders are being drawn down and mining output is not keeping pace with the rise in demand, perhaps this could be one of the explanations for the rise in gold price.

During the many years of Quantitative Easing the exchange value of the dollar was protected by the Japanese, British and EU central banks, also by printing money to insure that their currencies did not rise in value relative to the dollar. The U.S. Federal Reserve needs to protect dollar’s value so that it continues to play its role as the world’s reserve currency in which international transactions are conducted.

If the dollar loses this role, the US will lose the ability to pay its bills by printing dollars.  Dollar decline in value relative to other countries would cause flight from the dollar to the rising currencies. Catastrophe quickly occurs from increasing the supply of a currency that central banks are unwilling to hold.

The dollar has been depreciating relative to gold.  Rigging the currency market was necessary but not sufficient to stabilize the dollar’s value. The gold market also had to be rigged. To stop the dollar’s depreciation, naked short selling has been used to artificially increase the supply of paper gold in order to suppress the price. 

Unlike equities, gold shorts don’t have to be covered. This turns the price-setting gold futures market into a paper market where contracts are settled primarily in cash and not by taking delivery of gold.  Therefore, participants can increase the supply of the paper gold traded in the futures market by printing new contracts. When large numbers of contracts are suddenly dumped in the market, the sudden increase in paper gold supply drives down the price, this seems to be happening now.

If flight from the dollar is beginning, it will make it difficult for the Fed to accommodate the growing US budget deficit and continue its policy of lowering interest rates. With central banks moving their reserves from dollars (US Treasury bonds and bills) to gold, the demand for US government debt is not keeping up with supply.  The supply will be increasing due to the US$1.5 trillion US budget deficit. 

The Fed will have to take up the gap between the amount of new debt that has to be issued and the amount that can be sold by purchasing the difference.  In other words, the Fed will print more money with which to purchase the unsold portion of the new debt.  

The creation of more dollars when the dollar is experiencing pressure puts more downward pressure the currency.  To protect the dollar or make it attractive to investors and central banks, the Fed would have to raise interest rates substantially.  If the US economy is in recession or moving toward recession, the cost of rising interest rates would be high in terms of unemployment.  

With a rising price of gold, who would want to hold debt denominated in a rapidly depreciating currency when interest rates are low, zero, or negative?

The Fed faces an impending crisis that it has set up for itself. It is being said that the Fed is accountable to the elites who want to rid themselves of President Donald Trump.  Collapsing the economy on Trump’s head is one way to prevent his reelection.

Why Trump Can't Afford to Intervene in the Dollar Affairs

Volatility wise, Thursday was a relatively quiet day in the forex market. USD/JPY extended its losses but the greenback recovered against euro, sterling and other major currencies. The rallies in the Australian and New Zealand dollars were the strongest with both currencies experiencing their biggest one-day rally in 3 weeks against USD. While there were no US economic reports released, the rebound in stocks supported the steadier price action. Better than expected Chinese trade also helped fuel the recovery in AUD and NZD.

The big story of the day was President Trump's comments on USD. In a series of tweets, he said, "As your President, one would think that I would be thrilled with our very strong dollar. I am not! The Fed's high interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers like Caterpillar, Boeing, John Deere, our car companies, & others, to compete on a level playing field. With substantial Fed Cuts (there is no inflation) and no quantitative tightening, the dollar will make it possible for our companies to win against any competition. We have the greatest companies in the world, there is nobody even close, but unfortunately the same cannot be said about our Federal Reserve. They have called it wrong at every step of the way, and we are still winning. Can you imagine what would happen if they actually called it right?"

Investors are worried that by expressing a preference for a weaker dollar, President Trump is hinting that he could order the Treasury to intervene in the currency. This would be similar to his actions last week where he called China a currency manipulator on twitter and a day later, the Treasury made the label official. Could President Trump devalue the dollar? Certainly. Just last month he said he "could do that in two seconds if I wanted," but any intervention could backfire.

President Trump will argue that by devaluing the dollar, he's making US exporters cheaper and foreign profits of American companies more valuable in USD terms.

But dollar intervention is a bad idea because it drives up prices, creates more volatility in the markets and makes the Fed's job more difficult. If Trump's primary goal is to pressure the Fed to cut interest rates further, he's accomplished that by escalating the trade war with China. Markets collapsed, global growth will slow and investors are looking for two more rate cuts this year.

If Trump devalues USD, stronger foreign profits could be offset by lower stock valuations and weaker demand at home.

Also intervention rarely works if it is not coordinated with the central bank. If the Fed sterilizes the intervention, the impact could be limited. If stocks crash, investors will flock to the safety of US dollars anyway.

If intervention move is aimed at leveling the playing field with China, the US can't afford to intervene because China has deeper pockets. The Chinese government has $3 trillion in reserves to prevent the currency from weakening. US intervention on the other hand is funded by the Exchange Stabilization Fund, which has a buying power of USD 100 billion. Trump could allocate more funds but that would require the approval of Congress.

Judging from the price action in the dollar today and the move in US stocks, investors are not worried about intervention risk. They feel that the chance is low because it is unprecedented and dangerous but Trump likes to buck convention and could find ways to push this through.

Time to mend Saudi-Iranian relationship

The young Muslims often ask their seniors the reasons behind Saudi-Iranian animosity. The seniors very conveniently let the youngster to refer to internet, because they themselves have been brain washed by the dishonest western media. One of the outcomes of this constant brain washing is the perception drilled into the minds of Arabs, “Iran is a bigger threat than Israel”.

Let one begin analysis from the recent history spread over nearly half a century. Immediately after Islamic Revolution in Iran, Arab monarchs were made to believe that Iran is their number one enemy, which wants to dethrone them. United States emerged as the biggest enemy of Iran, as it failed to contain Islamic Revolution in Iran and also faced a few humiliating defeats. Having faced some worst defeats the United States, which was solely dependent on Arab oil prompted Iraq to attach Iran. In this war, spread over nearly a decade, Saudi-Iraqi petrodollars were used but all in vain, which also initiated an era of economic sanctions on Iran. Iranians must have lost hundreds and thousands of soldiers and civilian in that war, but economic sanctions gave them the courage to keep their economy afloat as well as face all sorts of external aggression, but they lost their substantial share in global oil trade.

The next target was Iraq, which proved an easy prey. Not only many of strategic oil installations were destroyed, the attempts to fragment it, left it too feeble. Over the years Israel has emerged the biggest buyer of stolen Iraqi oil. Now the target is Saudi Arabia. Since most of the Saudi oil is produced from fields located in area having Shia population, Sunni-Shia rivalry is being fueled. This has started decades ago after Hibzullah came to rescue Muslims living in Lebanon. The second phase of this proxy was fought in Syria and third phase is going on in Yemen and Bahrain, all the three countries having Shia population.

Anyone who does not accept this theory must scan the newspapers filled with accusations that Iranian and Houthis have attacked the tankers; dishonest western media is playing a key role in spreading disinformation. This is helping United States to sell billions of dollars arms to Saudi Arabia; United States has also previously sold huge arms by promoting ‘Iranian Phantom’.   Now most of the Arabs believe Iran is a bigger threat as compared to Israel.

Having fallen prey of western propaganda machine, Saudis are fighting US proxy war with Iran. Over the years they have been made to believe that keeping Iran out of oil trade, is bringing huge petro dollars to Saudi Arabia, which have enjoyed the status of ‘largest oil producing country’. However, most of the Saudi petro dollars are going back to United States, being the payment for the purchase of arms. Despite having tons of arms, Donald Trump says, “Saudis can’t survive if we take our hands off”. It is on record that soon after attacks on oil tankers; United States posted its soldiers in Saudi Arabia for the safety of Royal family.

This raises a question; does Saudi Arabia pay to the United States to defend its territory?  Even a person with ordinary wit knows ‘nothing comes free’. Despite buying billions of dollars arms every year, Saudi Arab has been neither successful in building its own army, navy and air force nor missile batteries that can help in combating Iran. Therefore, the monarchy is forced to depend on United States, which still consider its biggest enemy it savior. It must revisit history and see fate of Shah of Iran, Anwar Sadat of Egypt and Saddam Hussein of Iraq, to mention a few names.

It is an opportune moment for both Iran and Saudi Arabia to restore friendly relation, bid farewell to proxy wars and identify their real enemies. Hike in crude oil price has benefited United States, which has attained the status of biggest oil country. However, it goes without saying that many of US oil companies can go broke if oil prices fall below US$50/barrel. It is the time to save oil produced by Muslim countries, which its enemies are buying at huge discount.

Saudi Arab must pay attention to the offer made by Heshmatollah Falahatpisheh, a member of the Majlis National Security and Foreign Policy Committee of Iran. He has suggested that Arab countries in the Persian Gulf region must try to deescalate tension in the region, a move which Iran welcomes.

“We should move towards de-escalation. Tension is a reality in Iran’s foreign policy. Iran has many enemies that naturally cause tension. This situation should be managed. This is the opposite of Trump’s policy of increasing tension,” he told ISNA in an interview.

He noted, “Certain countries have adopted a different stance which shows a kind of green light to deescalate tension in the region. These countries have reached the conclusion that insecurity in the region harms them.”

Earlier, Abdullah al-Muallemi, the Saudi envoy to the United Nations, had said that Saudi Arabia seeks “diplomatic interactions” with Iran. “Saudi Arabia does not want war with Iran, neither in Yemen and nor anywhere else,” the Mehr news agency quoted him as saying.

Mohammad Javad Jamali Nobandegani, the deputy chairman of the Majlis National Security and Foreign Policy Committee, has said that Saudi Arabia can be a “strategic partner” of Iran if it abandons following the United States.

“If Saudi Arabia abandons animosity and stops blindly obeying America it can have a good strategic partner like the Islamic Republic, which will be to the benefit of all regional countries and Muslims”, Jamali Nobandegani told ISNA.

He added that Iran has always “extended hands of friendship to its neighbors”, citing Qatar as an example in which Iran opened its arms to the country when it was surrounded from land, sea and air by Saudi Arabia and the United Arab Emirates.

“Iran has always announced that it has no fundamental problem with its neighbors and extends hands of friendship to them. As a powerful country in the Persian Gulf region, we are ready to be a safe harbor for our neighbors,” he noted.

Iran also had good relationship with Saudi Arabia, the United Arab Emirates and Bahrain. However, Saudi Arabia and the UAE changed their policy toward Iran as Tehran seriously entered nuclear negotiations with the 5+1 countries – the five permanent members of the UN Security Council plus Germany – to end more than a decade of nuclear standoff with the West. Saudi Arabia was so unhappy with the negotiations that it even sent its then foreign minister Saudi al-Faisal to Vienna, the venue of the talks, in November 2014 to undermine the process of nuclear negotiations. Donald Trump has misused the frosty relationship between Iran and Saudi Arabia to sell more arms to Saudi Arabia and the UAE.

Iranian Foreign Minister, Mohammad Javad Zarif has rightly proposed non-aggression pact with regional Arab states to invalidate claims by the Trump administration that Iran is a threat to its southern Arab neighbors.