Fed Day. What is key?

Key Expectations

• Fed expected to leave rates unchanged at 3.50%-3.75% in a unanimous decision.
• The statement is expected to remove the easing bias, signaling that rate cuts are no longer the base case.
• Economic projections are likely to show higher inflation, slightly lower growth, and steady-to-lower unemployment.

Dot Plot in Focus

• The market’s main focus will be the dot plot.
• Expectations are for no rate cuts in 2026 or 2027, with a more hawkish distribution of forecasts.
• Any indication of a future rate cut would be viewed as dovish, while projections showing hikes would be hawkish.

Warsh’s First Meeting as Chair

• Fed Chair Kevin Warsh is expected to provide fewer policy clues given his criticism of forward guidance.
• He may note that falling oil prices following the U.S.-Iran diplomatic breakthrough could help offset recent inflation concerns.

Bottom Line

The expected message is that the Fed remains on hold, inflation risks remain elevated, and policymakers are becoming less inclined to signal future rate cuts. The statement changes and dot plot are likely to matter more than Warsh’s comments.

The USD is mostly higher

Before the break decision, US retail sales for May are expected to rise by 0.5%. The ex Auto is expected also at 0.5% (verse 0.7% last week). The retail control is expected to increase by 0.4% versus 0.5% last week.

The USD is mostly higher, but the USD is lower vs the JPY (-0.10%) and unchanged vs the CHF. The NZD is the weeakest with a decline of -0.38%. IN the video above I take a look at the EURUSD, USDJPY and GBPUSD from at technical perspective.

US stocks are mixed. Yields are higher.

Looking at the major US indices, they are mixed (Dow lower while S&P and Nasdaq are modestly higher) in premarket trading:

• Dow industrial average -35.67 points
• S&P index up 2.90 points
• NASDAQ index +112 points

Looking at the US that market:

• 2 year yield 4.062%, +1.5 basis points
• five year yield 4.172%, +2.1 basis points
• 10 year yield 4.443%, +1.5 basis points
• 30 year yield 4.938%, +0.9 basis points

In other markets:

• Crude oil is trading is trading above moved below unchanged at $76.04
• Gold is trading down five dollars or -0.12% at $4326
• Silver is down $0.16 or -0.22% at $69.78
• Bitcoin is trading down -$785..00 or -1.2% at $64,810