It’s not just missed trades that sting, it’s the ones that almost happened. Like that nearly-perfect USD setup that missed by a pip, or in this case… the Fed rate cuts we never got.

Powell just confirmed what many traders suspected: we could’ve been trading in a lower interest rate world if not for Trump’s tariffs.

Here’s what it means:

1. Powell Says Tariffs Derailed the Easing Cycle

On Tuesday, Fed Chair Jerome Powell told lawmakers that tariffs, especially the scope of them, are the main reason rates are still elevated. If it weren’t for Trump’s aggressive trade policy, the Fed might have cut rates twice by now.

Think about that: instead of holding at 4.25%–4.50%, the fed funds rate could be near 3.75%. That’s a different trading environment entirely, one that would shift everything from bond yields to USD direction.

2. Inflation Could’ve Stayed in Check

Powell implied that without tariffs, inflation expectations would’ve stayed anchored. That means traders might be pricing in more cuts already, instead of this drawn-out ‘wait and see’ Fed posture.

But here’s the irony: Trump’s broader economic agenda, tax cuts, deregulation, could’ve sparked inflation too if left unchecked. So even if the tariffs weren’t in play, rate cuts weren’t guaranteed.

3. The Big Bill and Bigger Questions

Also moving the needle this week: Trump’s massive $3.3 trillion economic bill narrowly cleared the Senate, thanks to VP JD Vance’s tiebreaker. That’s fueling mixed expectations, more growth, yes, but also more debt.

Meanwhile, BlackRock’s bond chief Rick Rieder says this is a “generational opportunity” for fixed income traders. With yields still relatively elevated, he sees the bond market as packed with asymmetric upside.

4. Forex Market Reactions? Mixed and Hesitant

For us FX traders, this is where things really sting. The U.S. dollar remains pinned near multi-month lows, not because of actual rate cuts, but because of the expectation of what could’ve been. The DXY continues to hover near 96.7, while pairs like USD/JPY and USD/CAD are wobbling on weak footing.

Had Powell cut rates already, we’d likely see a more decisive unwind in USD longs. Instead, the forex market is trading in limbo, torn between dovish guidance and inflation roadblocks. Until there’s clarity, expect choppy, whipsaw-heavy price action.

Here’s the Takeaway:

If it weren’t for tariffs, you might be trading in a 3-handle interest rate world right now. Powell made it clear: Trump’s trade aggression is the reason cuts aren’t on the table yet.

That’s a critical macro piece for us traders. As long as tariffs fuel inflation risk, the Fed’s dovish hands are tied.

Let’s keep an eye on Friday’s NFP. It could shake the markets again, but until then, don’t bet on the “what could’ve been.” Trade the policy we actually have.

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