Asia caught in the crossfire: Powell soap opera meets Xi’s ultimatum

Asia is walking into a geopolitical buzzsaw — and traders should take note. It’s not just the White House stomping around the Fed’s turf that’s rattling nerves, though let’s be clear, that’s chaos enough. But while markets are still pricing just a 22% chance Trump actually fires Powell, the bigger story is ripping across the tape like a trade war siren: Beijing just dropped the hammer, warning countries not to cut side deals with Washington “at the expense of China’s interests.” That’s not a press release — that’s a diplomatic flare in the sky.

The message? Crystal. China won’t sit quietly while Team Trump goes full scorched-earth, lining up bilateral trade deals to isolate Beijing. This latest salvo — "China Will Never Accept It" — is pure red line material, and it’s going to land with a sickening thud in the ears of every trade hawk in D.C. who thought the “gang-up-on-China” strategy would slide through global diplomacy like butter. Spoiler alert: it won’t.

This isn’t posturing anymore. It’s starting to smell like the real deal — an actual, no-kidding trade war escalation with teeth. Xi isn’t backing down. He’s out shaking hands in Vietnam, Malaysia, and Cambodia, stitching together a counter-alliance while the U.S. threatens to slam Pacific Rim exporters with tariffs for allegedly playing middleman in China’s transshipment shell game.

And here’s the kicker — Southeast Asian exporters aren’t just collateral damage, they’re cannon fodder. Factories risk going dark. Labor markets with zero safety nets? Hello, crisis. The U.S. might take a hit on inflation and equity volatility, sure — but for China, where nearly 40% of growth depends on trade, this is an existential test. They can’t bazooka their way out either — debt saturation is real, and Beijing knows it. So they’re doubling down on high-tech manufacturing, industrial policy, and dumping every US asset they can into decoupling from the West.

Asia’s in the blast radius. And while the Street’s still focused on the Powell soap opera, the real story is trade — and it’s looking ugly. You can feel it in the tape. You can see it in the flows. And if this spirals further, every long book in the region better start praying it’s not positioned for a face-melter. This ain’t a drill — it’s a strategic shift with a volatility tail—Batten down the hatches.

The view

Was that ever a hollow New York tape — like watching a panic in slow motion, volume down, lights dimmed. One of the quietest 3% sell-offs I can remember. It wasn’t manic, it wasn’t frantic — just a slow bleed that felt eerily orderly. What struck me was how empty the tape felt. Everyone who had to puke already did it last week. The deleveraging? Done. Stops? Triggered. And today? The market just slumped like a fighter who's out of gas but still on his feet. No punch left — but no buyers either. Just air pockets and soft hands all the way down.

Maybe that’s the tell — everyone expected this direction of travel, we just got there a little earlier than planned, thanks to Trump’s latest Fed tirade.

I stuck to my playbook. As flagged, I took the other side of the Powell panic storm and started peeling off EUR/USD longs through 1.1500 to 1.1560 — booked 75% of the position into that squeeze. Flipped some paper gold too, rotated into 10s while the panicked Powell crew was still catching their breath.

Polymarket’s got the Powell fire odds at 22%. I had 25% pencilled in, so we’re basically in line — and that headline risk is now baked into the crust.

In the Forex market, we just completed what I’ve been calling the "virtuous FX circle" from EUR/USD 1.1000 to 1.1500 — sooner than most expected, later than I wanted. Either way, we’re here. Now I’m sitting tight, waiting for a deeper dip. The next buy strike is 1.1375, with reload top-side buy-ins quietly camped around 1.1620–1.1640. I hope the dust settles and we get a repricing on the risk premium and a chance to rebuy the cheapies, but we’ll take what the tape gives.

Why did I cash out 75% of my long EUR/USD even though I still think we’re heading higher? Simple: it’s all about risk-adjusted targets and reading the forward policy tea leaves. We’re getting close to the point where exporter economies can’t stomach a runaway dollar collapse — not because they care about the U.S., but because surging local currencies will hammer their fragile recovery narratives. China? Different story. They’ve got the yuan duct-taped to the bottom of the CFETS basket, playing the old game of competitive stability while quietly exporting deflation across Asia. It’s a ruse, sure — but an effective one that lets them pretend they’re the adult in the global trade room.

But here’s the real kicker: Oh, to be a fly on the wall inside the ECB or BoJ right now. If the dollar keeps disintegrating, they won’t just sit around watching their currencies rip to multi-year highs. EUR at 1.18? USD/JPY near 130? That’s economic suicide. And they know it.

So the moment they blink — think emergency cuts, think QE 2.0 — we’re off to the liquidity races again. You’ll need more than an umbrella; better grab a boat. The next wave of global fiat debasement isn’t coming — it’s already on the horizon. Got Gold?