Insights 
VT 
In the European session, there are a few minor releases and the Eurozone Retail Sales report. However, market reaction is unlikely as the data is expected to have no impact on current expectations.
The American session’s main event is the FOMC Policy Announcement. The central bank is anticipated to keep interest rates steady at 4.25-4.50% and adopt a neutral position due to the uncertainty surrounding tariffs and inflation.
Market Repricing Potential
The market anticipates around 80 basis points of easing by year-end. Fed Chair Powell may respond to these expectations, potentially causing a market repricing.
Attention remains on news about tariffs with the expected announcement of a trade deal soon. This announcement could be made before the Middle East trip and might occur on Thursday, Friday, or Monday.
While today’s economic calendar from Europe is relatively uneventful, the retail sales data serves more as a side note than a market-moving force. Forecasts suggest figures broadly in line with previous estimates, making any deviation unlikely to sway pricing or shift opinions on monetary policy. As a result, there’s little need to react to these early morning releases, nor should traders expect euro volatility to emerge during their publication.
Shifting to the US, the main focus is set on the Federal Reserve’s policy decision. Rates are expected to be held between 4.25% and 4.50%, as policymakers appear content with their current stance. Several factors — namely uncertain inflation dynamics and trade negotiations — mean a wait-and-see approach has become the safer choice. This hesitance is not without merit; data continues to provide mixed implications and carries the potential to mislead if taken in isolation.
Heightened Tariff Speculation
Despite the expected pause in rate adjustments, futures markets already price in a meaningful degree of easing by year-end — roughly 80 basis points. We may observe some resistance from central bankers on those estimates. Powell has generally avoided locking himself into guidance, especially when the outlook is contentious or hinged on unresolved political developments, such as tariffs. However, should he hint that the market’s pricing is overly ambitious or misaligned with internal projections, repricing could be swift and volatile, with the front end of the yield curve taking notice first.
There’s also the matter of heightened tariff speculation. A trade deal announcement has now been narrowed to a possible three-day window: Thursday through Monday. Timed ahead of an overseas diplomatic visit, this gives traders a tighter horizon to assess risk. Should confirmation arrive, equity markets may rally, and Treasury yields could pick up on revived global optimism, suppressing demand for safer assets. This is not purely theoretical — we’ve seen in previous rounds how headlines alone have the power to swing momentum intraday, especially in thin holiday volumes.
For that reason, our focus has to remain on two fronts: watching the Fed’s tone and interpretation of inflation risk, and position-aware sensitivity to any credible commentary on trade agreements. The FOMC’s update, although predictable on rates, can still introduce surprise shifts through language, economic projections, or the tone used in the press conference. How the message lands — not just what is said — could determine interest rate expectations headed into the next scheduled meeting.
Overall, we must weigh any hawkish statements or downplaying of rate cut probabilities against potential upside from a resolved trade conflict. Derivative pricing should continue to reflect both themes, but near-term exposure will likely hinge heavily on how Powell addresses the divergence between market expectations and the committee’s stance, especially if he touches on data dependency or reacts to forward-looking pricing. Until then, the bid in options and futures pricing leans cautious, and that makes sense.
