The Fed kept interest rates unchanged, as widely anticipated, and signalled it's in no rush to cut them before gathering more data to assess the real impact of the tariff policy. It believes tariffs could lead to higher inflation and higher unemployment. And even though the spike in inflation is expected to be temporary, there’s a chance it could linger.

The thing is, the Fed thinks that US unemployment remains low and demand steady enough to allow the Fed to sit on its hands until there's more clarity. Some members even stated they would not support pre-emptive rate cuts to shield against a slowing economy. ‘It’s not a situation where we can be pre-emptive, said Chair Powell. ‘Because we actually don’t know what the right response to the data will be until we see more data.’ Fair enough. He’s not Superman—he doesn’t have a crystal ball and can’t predict how the tariff situation will evolve, how other countries will react, or how it will all play out economically for the US.

So, yesterday’s FOMC decision and press conference made sense. The US 2-year yield rebounded after the decision, the probability of a June cut eased to 20%, and US equities came under pressure.

But the headlines shifted quickly: news that the Trump administration would scrap the AI chip curbs engineered by Biden gave a late boost to major indices in the final half-hour of trading. Nvidia—flat for most of the session—rallied over 3% in the last 30 minutes.

Yet—wait, yet—those AI curbs will not be scrapped. They’ll be replaced by “simpler” rules, said the Commerce Department’s Bureau of Industry and Security. As a result, Nvidia shares were flat to slightly negative in after-hours trading as investors digested the news.

Elsewhere, AMD—Nvidia’s biggest rival—jumped 1.76% after posting strong quarterly earnings and offering a bullish forecast for the current quarter, driven by demand for high-end personal computers capable of running AI software. I still believe AMD is in an interesting position to grow as investors warm up to the idea that cheaper chips can perform relatively well and may be chosen over Nvidia’s premium products. However, the fact that the Middle East could see AI chip restrictions eased is excellent news for Nvidia, as countries in the region have deep pockets and will likely opt for top-tier chips—Nvidia’s.

In other Big Tech news, Apple announced—during its testimony in the US Justice Department’s lawsuit against Alphabet—that it plans to revamp its Safari web browser to highlight AI-powered search engines. This move could mark the end of a $20-billion-a-year (yes, $20 billion per year) deal with Google to be the default search engine on Apple devices. AI search engines will now be part of a list, not the default.

Reaction? A hefty 7.5% slump in Google’s share price, amid rising concerns that AI-powered engines will increase competition and chip away at Google’s decades-long monopoly in online search. That said, Google remains a significant AI player—it has access to vast amounts of data that competitors lack, and it will do everything it can to preserve its dominance. But the arrival of ChatGPT clearly ended Google's uncontested reign in the sector, meaning the company now needs to work harder: invest, innovate, and reinvent. That sounds like the end of easy money.

Zooming out, equities in China and Japan are trading firmer this morning, while US and European futures are in the green ahead of an expected trade deal announcement with a ‘big’ country—reportedly the UK. While the UK isn’t a major exporter to the US, progress there could set the stage for more meaningful deals with heavyweight partners like India, China, Japan, or the EU. Consider it a promising appetizer before the main course.

We’ll get more details later today, but for now, trade optimism is outweighing yesterday’s Fed hawkishness and may help set the tone for the rest of the week—especially with the US and China preparing to meet in Geneva to discuss their unsustainable tariff situation. Reports suggest that Temu and Shein saw double-digit sales declines in the week following price hikes aimed at passing Trump’s tariffs on to US consumers. Positive developments on that front could give markets another boost. That said, anything short of a 50% cut in current tariffs probably won’t move the needle much.