Wall Street Week Ahead: Focus on FOMC Meeting and Trade Talks Progress

This week’s trading will be dominated by two major themes. First is the progress on trade talks—any positive developments on this front could lift equity markets and extend the recent rally. Second is the upcoming Federal Reserve's interest rate decision and outlook, scheduled for Wednesday. Regarding trade talks, there are three key headlines we’ll be watching closely.

1. EU Prepares Trade Proposal for U.S.
EU is expected to present a new framework for trade negotiations with Washington this week. The European Union’s proposal will reportedly include a package aimed at reducing both tariff and non-tariff barriers and encouraging European investment in the U.S. The EU currently runs a €48 billion trade surplus with the U.S. and may also commit to purchasing more American goods, including LNG and advanced technologies.

2. U.S.–India Trade Deal Gains Momentum
Hopes for a swift trade agreement between the U.S. and India have brightened after Vice President JD Vance signaled that the deal could be one of the first finalised under the current administration. The White House confirmed that both countries have completed the terms of reference for formal negotiations. Treasury Secretary Scott Bessent also indicated that India might be first in line for a bilateral trade pact.

3. Beijing Offers Signals of Cooperation
In a notable development, China is reportedly exploring ways to address longstanding U.S. concerns over its role in the fentanyl supply chain. According to sources cited by the Wall Street Journal, Chinese officials are evaluating potential goodwill gestures that could pave the way for broader trade talks. Wang Xiaohong, China’s public security minister and a senior figure in the State Council, has been suggested as a potential envoy for direct talks with senior U.S. officials.

Cargo vessel Photo by Ian Taylor on Unsplash

FOMC Meeting

Fed Set to Hold Rates as Market Adjusts Expectations
The Federal Reserve is expected to leave interest rates unchanged this week, with the federal funds rate remaining in the 4.25% to 4.50% range. The decision will follow the conclusion of the FOMC’s two-day meeting on Wednesday. Investors had previously anticipated a potential rate cut in June, but those expectations have cooled in light of April’s robust jobs report. Market-implied odds for a 25-basis-point cut have dropped to 34%, down from 55% just days earlier.

Target Rate Probabilities For June Fed Meeting - source CME FedWatch

Powell Under Political Spotlight
Fed Chair Jerome Powell continues to face criticism from President Donald Trump, who has urged the central bank to ease policy more aggressively. At a Michigan rally marking his first 100 days in office, Trump lambasted Powell’s leadership, blaming him for being slow to act amid emerging signs of economic stress.

Source: Truth Social

In April, Trump rattled Wall Street by criticizing Fed Chair Jerome Powell and suggesting he had the authority to remove him before the end of his term. U.S. equities declined as traders weighed the possibility of Powell being ousted. The uncertainty also sparked a broader debate among economists about the U.S.'s status as a safe haven, further contributing to weakness in the dollar. Markets later recovered somewhat after Trump clarified that he did not intend to fire Powell.

Fed Opts for Caution Amid Mixed Signals
Despite pressure from the White House, Powell and fellow policymakers remain cautious. The Fed has reiterated that its decisions will be driven by economic data rather than external commentary. While inflation is still running above target, with core PCE up 2.6% in March, the labor market remains relatively strong, giving the central bank room to wait and assess further developments.

Growth Falters in Q1
U.S. GDP contracted by 0.3% in the first quarter, based on preliminary data from the Bureau of Economic Analysis. The decline was largely attributed to a spike in imports, potentially tied to tariff-related front-loading. While the figure may be revised in subsequent estimates, it adds another layer of complexity for policymakers balancing inflation concerns against signs of economic softening.

All Eyes on Powell’s Guidance
With monetary policy hanging in the balance, Powell’s post-meeting press conference will be closely analyzed for any hints about future moves. Traders will be listening for how the Fed plans to navigate persistent inflation, cooling growth, and renewed trade uncertainties on the global stage.

Stay tuned for our in-depth macro coverage at market.page/macro. Also, be sure to explore our other coverage boards for more insights!