Tariff clouds loom, traders increase hedging against Federal Reserve interest rate volatility risks

Due to the ongoing uncertainty regarding the impact of the Trump administration's policies on the economy, traders are increasing their bets to hedge against the risks of Federal Reserve interest rate fluctuations. The swap market is pricing in expectations that the Federal Reserve will cut rates twice in October, but the uncertainty surrounding the economic outlook is prompting traders to buy options to hedge against the outcomes of rate cuts. Goldman Sachs and Citigroup hold opposing views on the timing of rate cuts, expecting larger cuts in the future. Open interest has increased to about 250,000 contracts, with traders anticipating that the Federal Reserve will delay rate cuts. The employment report in May may influence policy expectations