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HSBC Asset Management highlights a recent surge in the US policy uncertainty index driven by developments in trade policies and Federal Reserve communications. Despite this, US equities remain in a range-bound pattern with volatility subdued, suggesting market caution amid mixed signals. The firm forecasts US economic growth to align with long-term trends, with inflation persisting at elevated levels but expected to ease gradually through 2026. This analysis underscores the delicate balance between policy-driven uncertainties and the Federal Reserve's inflation-fighting efforts. For traders, the mixed signals present a complex landscape. The contained volatility in equities contrasts with heightened policy uncertainty, creating opportunities for range-trading strategies. The Fed's potential response to inflation moderation will be critical for forex markets, particularly for USD pairs. Investors should monitor upcoming Fed statements and trade policy updates for directional cues. The gradual inflation moderation path through 2026 implies a prolonged period of monetary policy normalization. For global markets, this could delay rate-cut expectations, impacting bond yields and risk assets. Traders should watch for divergences between economic data and policy signals, which may create short-term volatility. The key focus remains on how the Fed balances growth preservation with inflation control.
