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There is unusual potential for a new shock, a new disruption due to Trump policiesGeopolitical risks are elevated and attacks on the Fed’s independence is another key riskThere is no easy way to manage this uncertaintyA Fed that is not delivering predictability is not going to be good for anybodyUnpredictability of US policy has dented dollar as the global safe assetUSD/CAD exchange rate has not been a big preoccupation for us in recent yearsBut if USD/CAD exchange rate changes a lot, that will affect our projectionsAnd we will have to take that into accountWe are feeling like there are more things that can go wrong around that forecast, it is more vulnerableThat’s an honest take as most major central banks have a lot to think about now, and not just about domestic issues. As Macklem mentioned, Trump making waves on the geopolitical scene and attacking the Fed’s independence are two things that cannot be overlooked. And that is not only for the respective impact on their own, but also on the likes of markets with precious metals surging and the dollar tumbling.Besides the above, Macklem was also asked about whether risks are more tilted towards a rate cut or rate hike later in the year. However, he chose to play it safe in commenting that:”In order to comment on the balance, you need to be able to assign probabilities to the risks. And to be honest, I think we’re finding that difficult.”
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
Trump’s policies are stirring up geopolitical risks, and here’s why that matters for traders: With the Fed facing increasing scrutiny and potential disruptions in monetary policy, the market’s predictability is at risk. Traders thrive on clarity, and when the Fed’s independence is questioned, it creates a volatile environment. This unpredictability could lead to sudden shifts in interest rates or economic forecasts, impacting everything from forex pairs to crypto valuations. Keep an eye on how these geopolitical tensions play out, as they could trigger risk-off sentiment, pushing traders towards safe havens like gold or the US dollar. Also, consider the broader implications for equities and commodities. If the Fed’s actions become erratic, we might see a flight to quality, affecting asset correlations. Watch for key economic indicators and Fed statements that could signal shifts in policy or market sentiment. The next few weeks will be crucial for gauging how these risks evolve and impact trading strategies.
📮 Takeaway
Monitor Fed communications closely; any signs of policy shifts could trigger significant market volatility, especially in forex and commodities.
