The Dow Jones Industrial Average (DJIA) followed the broader market lower on Friday, declining to 41,150 as investors gear up for a tense weekend. The United States (US) and China are headed for opening trade talks in Switzerland this weekend, but policymakers from both administrations have cautioned that talks will be strictly preliminary. Chinese delegates have specifically warned that a definitive deal could be months away.

US President Donald Trump hit social media early on Friday, publicly musing about a potential walkback of tariffs on Chinese goods that currently stand at an eye-watering 145%. Donald Trump floated the idea of reducing Chinese tariffs to 80%. An 80% tariff on Chinese goods is indistinguishable from 145%, as both levels are so high that they functionally represent an embargo on cheap trade, which the entire US economy is wholly dependent on.
The Federal Reserve (Fed) hit a firm wait-and-see tone this week, after holding interest rates steady in May. A slew of Fed policymakers made public appearances on Friday, but they all put significant effort into avoiding speaking directly on monetary policy. The Fed looks set to continue shrugging its shoulders at the uncertainty from lopsided trade policy rendering it impossible to accurately forecast economic outcomes, leaving the data-dependent Fed planted firmly on the sidelines.

According to the CME's FedWatch Tool, rate traders are still pricing in better-than-even odds of the Fed being forced to deliver another quarter-point rate cut in July, but bets have been bleeding back toward another rate hold. At the current cut, rate markets are pricing in a 40% chance that the Fed won't cut in July either, up from the 20% to 30% odds were floating around earlier this week.

Source: Fxstreet