Core Viewpoint - The article discusses the impact of President Trump's comments on Federal Reserve Chairman Jerome Powell and the resulting market reactions, particularly the emergence of "Powell hedging" trades as investors navigate uncertainty in monetary policy [1][4]. Market Reactions - Following Trump's criticism of Powell, market speculation about Powell's potential departure intensified, leading to increased volatility in U.S. Treasury yields and stock markets [3][4]. - The 30-year U.S. Treasury yield rose to 5.07%, the highest since May, while the spread between 5-year and 30-year Treasuries reached its widest since 2021 [4]. Trading Strategies - Investors have engaged in "Powell hedging" trades, buying short-term Treasuries while selling long-term ones, anticipating that a new Fed chair might align with Trump's push for lower interest rates [4][5]. - A survey by JPMorgan indicated an increase in both long and short positions in U.S. Treasuries, with a slight decrease in net long positions [5]. Economic Outlook - The Federal Reserve is expected to maintain its current interest rate of approximately 4.3% during the July meeting, despite pressure from Trump for a reduction of about 3 percentage points [8]. - Many economists predict that the Fed may begin discussions on rate cuts in September, with Goldman Sachs estimating a greater than 50% probability of a rate cut in that month [9]. Inflation Concerns - The article highlights concerns about inflation, with the 10-year breakeven inflation rate rising to 2.42%, close to its highest level since February [6]. - Analysts suggest that the Fed's decisions on interest rates will be closely tied to the evolving trade situation and its impact on inflation [8].

Group 1 - President Trump has intensified pressure on Fed Chairman Powell, leading to market speculation about Powell's potential early departure, with Trump labeling Powell a "fool" and suggesting he would leave in eight months [3][4] - The market has initiated a "Powell hedge" trading strategy in response to uncertainty surrounding Fed policy, with significant movements in U.S. Treasury yields and currency values [4][5] - Analysts have noted a shift in investor sentiment, with increased long and short positions in U.S. Treasuries, indicating a cautious approach amid political pressures on the Fed [5][6] Group 2 - The Federal Reserve is expected to maintain its current interest rates during the upcoming July meeting, despite external pressures, as inflation remains above the target [8][9] - Economic forecasts suggest that while the Fed may not cut rates in July, discussions about potential rate cuts could occur in September, with expectations of a 25 basis point reduction in subsequent months [9] - Market analysts are closely monitoring the relationship between tariffs and interest rate decisions, indicating that uncertainty in trade policy could influence the Fed's stance on rate cuts [8][9]