Dollar Soars On Hawkish Fed Shift Under Warsh
Hawkish Fed Shift
The Dollar Index is trading back above the $100 level today after a hawkish shift at the June FOMC yesterday evening, the first under new chairman Kevin Warsh. There are a few key points to mention from the meeting, the first being the clear hawkish shift in the updated dot plot forecasts. Nine of the Fed’s policymakers now see at least one hike this year, this is up from zero in March, with five members projecting at least two hikes and one member looking for three hikes in 2026. In contrast, eight members expect no change this year while one member projects a cut. Interestingly, Warsh himself did not make a projection, citing the ‘abysmal’ predictive ability of the Fed in the past. Furthermore, at the press conference, Warsh told reporters that he couldn’t offer ‘any guidance on what we’re going to do next” but assured that the Fed ‘will deliver price stability.”
Fed Tightening Expectations
On the back of the meeting, market pricing for a Fed rate hike by year end has risen again with traders now pricing a more than 80% chance of a hike, up from below 60% ahead of the meeting. Warsh had been picked by Trump as a candidate more likely to deliver the rate cuts he so consistently demanded from Powell. However, in his first outing as Fed president, Warsh looks to be leaning more towards the hawkish camp, and USD looks set to remain bid here accordingly.
Technical Views
DXY
The rally in the index has seen price spiking back above the $100 level. With momentum studies bullish, focus is on a continuation higher with the 101.91 level the next bull target, alongside the channel highs. Below, 99.15 and the channel lows remain the key support areas to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.