17/06/2026 Daily Reports
FX Daily: Kevin Warsh Holds the Keys to Dollar Resilience
- The Fed’s Ultimate Test: Today’s FOMC policy announcement is a critical test for the US Dollar (USD). With Brent crude now holding firmly below $80/bbl following the US-Iran peace deal, the greenback has lost its geopolitical energy cushion and is now entirely reliant on the Fed maintaining a hawkish stance.
- The Warsh Factor: While rates are almost certain to stay on hold today, the focus is entirely on new Fed Chair Kevin Warsh’s communication. Analysts believe Warsh will attempt to match market expectations by removing the “easing bias” from the Fed’s statement, which should keep the dollar firm. However, any slight misstep or overly cautious nuance in his press conference could trigger a sharp dollar sell-off.
- Downside Risks for the Dollar: The balance of risks is heavily tilted to the downside for the USD. The combination of falling oil prices (which cools inflation) and a market that is still aggressively pricing in 21 basis points of Fed tightening by December leaves the dollar highly vulnerable to a dovish reality check.
- Euro Eyes Stabilization: EUR/USD has resurfaced above 1.160 as it awaits the Fed’s cues. The structural details of the US-Iran deal—including asset unfreezing and economic development funds—suggest the drop in oil prices is sustainable. This structurally reduces the downside economic risks for Europe, with the pair expected to consolidate in the 1.160–1.1650 zone.
- UK Inflation Misses Expectations: Turning to the British Pound, May’s UK Headline CPI came in cooler than expected, holding unchanged at 2.8% (against a 3.0% consensus), driven by lower food inflation. Core CPI edged up to 2.6% (against 2.7% expected), while Services CPI came in slightly hotter at 3.7%.
- Sterling Faces Policy and Political Peril: Despite the mixed inflation data, analysts still expect a 7-2 vote split for a rate hold by the Bank of England (BoE) tomorrow. However, the pound faces major upside risks on EUR/GBP (meaning a weaker pound) because the market’s current pricing of 30bps of BoE tightening looks too hawkish, especially with major UK political risk looming in tomorrow’s by-election.
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