Oval office curtain call: Deals, drama, and Dollar reversals

The Fed did exactly what the market expected—held the benchmark rate steady at 4.25%–4.50% with a unanimous vote and zero urgency to shift gears. Powell stayed on script, brushing off pressure from President Trump for a rate cut, reaffirming that political noise doesn’t move policy. The message? We’re watching, not acting—and the cost of patience is low.

Markets took it in stride. No panic, no tantrum. U.S. equities continued their grind higher, bond market reflexivity stayed intact, and the dollar—still bloated with risk premium—caught a hawkish tailwind. DXY has rebounded off the lows, bolstered by both Powell’s steadiness and the sense that the trade war fog might finally be thinning out.

The dollar still carries a negative risk premium, keeping the “Buck” running well below where rate spreads, equity differentials, and relative spot economic performance would usually pin it. EUR/USD, by almost any fair value metric, remains 3.75% to 4.25% overcooked. That kind of mispricing doesn’t last forever, but the road to reversion isn’t going to be a glide—it’s going to be a grind, and everyone in FX knows it.

Traders are front-running headlines again—this time off a Trump X-post teeing up a “MAJOR TRADE DEAL” reveal at 10 A.M EST tomorrow. All caps. All mystery. All signal. The choreography is obvious, but we’ve already torn the curtain. Our Asia Energy Gambit mapped the template: LNG is the ticket. If you want tariff breathing room, you better buy American gas—and lots of it.

Meanwhile, Brussels continues to posture—busy mapping out the next round of retaliatory tariffs while sitting on their hands when it comes to real reform. Maybe instead of floating €100 billion in new import taxes, they start by cutting the regulatory spaghetti around U.S. tech. While Asia is cutting bilateral energy deals with the White House, the EU is still debating carbon compliance codes.

In the backdrop, market turbulence has cooled noticeably since the early-April churn. That’s not just headline sugar—it’s backed by firmer U.S. data, which has given dollar bulls something tangible to lean on. The reflexive bid is back. No fireworks, but enough underlying flow to keep the greenback off the back foot.

The March BoJ minutes laid it bare: policymakers are split. Some want to hold fire amid growing U.S. tariff risk, while others argue the BoJ can’t afford to sit idle—even as global uncertainty clouds Japan’s already-fragile recovery. The end result? Mixed signals, but one clear market takeaway: the yen is back in play.

JPY is once again showing traditional correlation with U.S. bonds, which are starting to behave like actual price-discovery instruments again. That re-coupling matters.

And today, a lot of that “deal optimism” is bleeding out—right where it counts—in the JPY tape. The sugar rush from headline diplomacy is morphing into something real, and it’s finally triggering the long JPY squeeze we’ve been positioned for. Stops are tucked well above break-evens now, but we’re letting it breathe—getting a little top-side greedy to see what Trump’s grand 10 A.M. Oval Office reveal has in store tomorrow.

We’ve been banging the drum on this setup since the weekend—what the market’s now calling the “Art of the Trade.” The core thesis? As bilateral trade deals take shape and that bloated USD-negative risk premium starts leaking out, the over-subscribed bearish dollar camp has to start trimming against the JPY and EUR. And if it does, the snapback won’t be gentle—it will be a full-blown positioning squeeze.

Gold took a sharp turn south after the usual Shanghai open bid briefly nudged it above $3,400. But with liquidity back in full swing, bullion desks didn’t waste a second—stepping in and smashing it lower as traders started pricing in the next leg of the ASEAN trade domino. Momentum is shifting fast now, with local desks expecting tomorrow to kick off a sequence of trade deals that could soften risk hedges and take more wind out of gold’s sails.

Flight-to-safety is fading—for now. Trade optimism is the new hedge.

It’s a funny tape right now—less driven by macro logic, more by headline sequencing.