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During his visit to South Korea, US President Donald Trump stated that he will not have the Federal Reserve increase interest rates. Trump announced commitments of over $18 trillion in new investments, forecasting a total of $21 or $22 trillion by the end of his second term.
He anticipates a 4% GDP growth in the next quarter, noting the resurgence of US factories. Semiconductor manufacturing is returning, and there are plans for a revitalised shipbuilding sector. Economic security was described as a component of national security, with trade policy influencing new investments. A trade deal with South Korea is anticipated, and discussions with Chinese President Xi are upcoming.
The Role of the Federal Reserve
The Federal Reserve (Fed) manages US monetary policy to maintain price stability and employment, adjusting interest rates to influence the US dollar. Eight annual meetings are held by Fed officials to make policy decisions. Quantitative Easing involves buying bonds to increase credit flow, which can weaken the US dollar. Quantitative Tightening stops these purchases, potentially strengthening the dollar.
Lallalit Srijandorn authored this article, having lived in France since 2019 and now based in Paris and Bangkok as a digital entrepreneur. Markets are fast-moving, with FXStreet providing insights through their newsletter.
From our perspective on October 29, 2025, the President’s statement puts the Federal Reserve’s independence in the spotlight. With the latest September CPI data showing inflation at 3.8%, still well above the 2% target, the Fed has a clear mandate to consider further tightening. The market should anticipate heightened volatility as traders weigh political pressure against economic data.
This uncertainty creates opportunities in interest rate derivatives. Given the current Fed funds rate is in the 5.00-5.25% range, the President’s call to halt hikes is a significant event. We should consider positions that benefit from market indecision, such as purchasing straddles on Treasury note futures, which will profit from a large move whether the Fed holds firm or bows to pressure.
Impact on Equity Markets
For equity markets, the promise of 4% GDP growth is highly optimistic, especially when contrasted with the Q3 2025 advance estimate of 2.1%. While the prospect of lower rates is supportive of stocks, this divergence suggests caution. Traders could use call options on the S&P 500 to gain upside exposure while strictly limiting potential downside risk.
The US Dollar faces two powerful but opposing forces. The prospect of no further rate hikes would normally weaken the dollar, but the claim of securing $18 trillion in new investments would create massive demand for the currency. This conflicting narrative suggests that options on the US Dollar Index (DXY) are a logical way to trade the expected volatility without betting on a specific direction.
Specific sectors like semiconductors and industrials appear poised to benefit from the stated policy focus. We have already seen the Philadelphia Semiconductor Index (SOX) gain over 15% year-to-date in 2025 on news of reshoring. Looking at call options on industrial ETFs could be a direct way to trade the narrative of “booming factories” in the coming weeks.
