A broad-based hawkish reaction was seen across markets, given a much more hawkish than anticipated Federal Reserve decision (reviews below). Given this, US Indices saw losses with all sectors in the red, with Treasuries sold and precious metals noticing extensive losses, with spot silver underperforming its counterpart. The Dollar saw significant strength post-Fed, to the detriment of G10 FX peers, with high-beta FX lagging ahead of a few central bank decisions on Thursday, namely SNB, BoE, and Norges. WTI and Brent were very choppy on Wednesday and settled with slight gains, as geopolitics took a back seat, for the first time in a while, as attention focuses on the official signing of the US/Iran MoU, with some suggesting it may even come before Friday. On the data footing, US Retail Sales surpassed Wall St. consensus, but garnered little market reaction, given all focus was on the FOMC later in the session.
FED
Overall, the statement and dot plots were more hawkish than expected. The Fed kept rates on hold as widely expected but completely changed the FOMC statement, in a unanimous decision. The committee agreed to remove forward guidance completely, while it also updated its descriptions of the economy, adding more factors to the statement:
Inflation
The Committee reiterated that inflation remains elevated but updated its language to note that inflation is running above its 2% goal “in part reflecting supply shocks that have driven price increases in certain sectors, including energy” (prev. “in part reflecting the recent increase in global energy prices”). The statement also explicitly reaffirmed the Committee’s commitment to achieving price stability.
Employment
The labour market assessment was upgraded. The Fed now states that “job gains have kept pace with the workforce, and the unemployment rate has changed little” (prev. “job gains have remained low, on average, and the unemployment rate has been little changed in recent months”), reflecting the recent run of stronger payroll reports.
Economic Activity
The Committee noted that economic activity is “expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East” (prev. “economic activity has been expanding at a solid pace”). It also added a new line stating that “productivity growth and capital investment are strong.”
Reserves
The statement also explicitly reaffirmed the Committee’s policy of maintaining ample reserves in the banking system.
Dot Plots
The updated Summary of Economic Projections was notably hawkish. One participant did not submit forecasts, widely believed to be Chair Warsh, given his recent arrival at the Fed and his well-known scepticism towards forward guidance. The median Federal Funds rate projection for 2026 rose to 3.8% from 3.4%, implying one 25bp rate hike versus one 25bp rate cut in the March projections. The 2027 median rose to 3.6% from 3.1%, implying rates are expected to remain on hold through the end of 2027. The 2028 median increased to 3.4% from 3.1%, while the longer-run rate remained unchanged at 3.1%. The economic projections also reflected a more stagflationary outlook. Inflation forecasts were revised higher, unemployment projections were revised slightly lower in 2026, and real GDP growth forecasts were downgraded. The distribution of dots was equally notable. While the median projects one hike in 2026, one participant forecasts three hikes, five project two hikes, and three project one hike. In March, no participants projected rate hikes. Meanwhile, eight participants expect rates to remain unchanged through 2026 (prev. seven), while only one projects a rate cut (prev. seven). The shift in the distribution highlights a significant hawkish turn within the Committee and suggests policymakers are increasingly focused on inflation risks rather than labour market concerns.
FED CHAIR WARSH:
Warsh’s first press conference largely echoed the hawkish statement given his strong emphasis on returning inflation to the target. When asked about employment, he said the committee thought the labour market was stable, but some thought it was trending better than that, adding that trends matter more than data points. He was also asked about how restrictive he views policy, in which he gave a hawkish response; he said it is “uneven”, noting the only place you could see it as restrictive is in the housing market. Warsh also confirmed it was him who did not submit a dot plot forecast, as he does not see it helpful on how to conduct policy – this could imply he may not submit dots again in two meetings’ time. Regarding the hawkish shift in his colleagues’ dot plots, he said they did not feel bound by their dots, and he did not hear a lot of conviction about them. On SEPs, Warsh added that the FOMC made a commitment to deliver projections and expects them to live up to that, but by the end of the year, would not be surprised if there is a new communications framework and changes to SEPs. When asked about whether a rate cut was discussed, Warsh said there was one proposal on the table, very little discussion on it, no discussion on any other proposals – he did not specify the direction of the proposal. The new Fed Chair also announced he will put five task forces together to review certain topics: 1) Communication: Expects to propose changes, including to SEPs. 2) Balance sheet: Review the benefits and risks of an ample reserve regime, and the composition of the balance sheet. 3): Use of data sources: Consider new data sources and methodological changes. 4) Productivity and Jobs: Will survey the reach of AI and other general-purpose tech. 5): Fed’s inflation frameworks: Will examine drivers of inflation. Elsewhere, Oil closed flat while Gold ended Wednesday’s session with a loss of over 2%.
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For anyone following my Platinum Service it made 785 points yesterday and is now ahead by 6167 points for June after ending May with a loss of 1104 points, having ended April with a gain of 1730 points, after ending March with a massive gain of 9002 points, having closed February with a strong gain of 5482 points after ending January with a gain of 4757 points, having closed December with a gain of 2599 points, after ending the month of November with a gain of 4542 points, after ending October with a nice gain of 5110 points after closing September with a gain of 3774 points while ending August with a gain of 3362 points after closing July with a gain of 3753 points after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 1.21% lower at a price of 7420.
The Dow Jones Industrial Average closed 507 points lower for a 0.98% loss at a price of 51,492.
The NASDAQ 100 closed 0.99% lower at a price of 29,670.
The Stoxx Europe 600 Index closed 0.52% higher.
This Morning, the MSCI Asia Pacific closed 0.7% higher.
This Morning, the Nikkei closed 1.65% higher at a price of 71,053.
Currencies
The Bloomberg Dollar Spot Index closed 1.02% higher.
The Euro closed 1.03% lower at $1.1488.
The British Pound closed 1.18% lower at $1.3272.
The Japanese Yen fell 0.21% closing at $160.74.
Bonds
U.K.’s 10-Year Gilt closed 4 basis points lower at 4.76%.
Germany’s 10-Year Bund Yield closed 2 basis points higher at 2.95%
U.S.10 Year Treasury closed 5 basis points higher at 4.49%.
Commodities
West Texas Intermediate crude closed 0.14% lower at $75.94 a barrel.
Gold closed 2.06% lower at $4241.10 an ounce.
This morning on the Economic front we already have the release of U.K. Unemployment which came in at 4.9% versus 5.0% expected. Next, we have Euro-Zone Construction Output at 10.00 am and the Bank of England Rate Announcement at 12.00 pm. This is followed by U.S. Weekly Jobless Claims and the Philly Fed Manufacturing Index at 1.30 pm. Finally, we have the Leading Index at 3.00 pm.
Cash S&P 500
Interest Rates surged on Wednesday, with the 2-year rising by more than 13 basis points to finish near 4.19%, the highest level since late 2022. Meanwhile, March 2027 Fed Fund Futures rose to 4.08%. The market has essentially priced in two rate hikes from the Fed following yesterday’s Fed Meeting, and that is a big policy U-turn from where we stood not that long ago. The 3-month Treasury 12-month forward minus 3-Month Treasury bill spread pretty much confirms this view, rising above 50 bps. The Dollar, in the meantime, sits right on resistance at 100.40, and a breakout would likely set it up to rise toward 102. So, at least at the outset, the Bond and FX markets seem to be taking the message from Warsh and the Fed seriously. The message is that no one will hold your hand, and it sounds as if the objective is to let markets trade freely without the Fed’s influence. That would be, for someone like me, really nice. It could very well be the case that macro will once again actually matter. I hope that will be the case. The Open Gap from Monday on the S&P 500 is now filled. The issue for today is that it is June OPEX and a long holiday weekend, with markets closed on Friday, which could mean volatility-driven selling is in play. The VIX 1-day did rise and close over 20 today, so I would not be surprised to see it come down tomorrow and for stocks to regain some of yesterday’s losses which has already happened as President Trump has now signed a deal with Ian’s Pezeshkian with further talks due in the next 60 days. The question is what Warsh will actually do in the end and whether he is just all talk. The press conference yesterday was revealing; there is no doubt that change is coming, and he seems rather determined to get inflation back to target. If that is real, then markets are in for a big change. My S&P plan worked well as shortly after the S&P hit my 7456 buy level we rallied to my 7497 T/P level before subsequently falling 70 Handles into the close. On the back of the Iran deal being signed, the S&P has rallied, sitting at 7487 as I go to post, leaving another large potential gap opening. The S&P has short-term resistance from 7498/7523 where I will be a small seller with a tight 7541 ‘Closing Stop’. The S&P has support below from 7370/7395 where I will be a strong buyer with a 7349 ‘Closing Stop’. If I am taken short, I will have a T/P level at 7470. If I am taken long, I will have a T/P level at 7423. If this view changes, I will be back with a new update for my Platinum Members.
EUR/USD
The 1% rise in the Dollar saw the Euro trade lower to my 1.1500 buy level. I am still long with a now lower 1.1560 T/P level. I will add to this position at 1.1420 while lowering my ‘Closing Stop’ to 1.1345. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
The Dollar rallied to my 100.05 T/P level on my latest 99.70 long position and I am now flat. Today, I will again be a buyer on any dip lower to 99.40/100.10 with a higher 98.65 ‘Closing Stop’. If I am taken long, I will have a T/P level at 100.80.
Russell 2000
Frustratingly the Russell missed Wednesday’s sell range by just one point before falling 60 points into the close and I am still flat. Ahead of the US long-weekend I will not chase the Russell lower. Therefore, I will continue to be a seller from 2980/3050 with the same 3115 ‘Closing Stop’. If I am taken short, I will have a T/P level at 2935.
FTSE 100
The FTSE never came close to Wednesday’s sell/buy ranges and I am still flat. The FSTE has resistance from 10570/10670 where I will be a seller with a 10755 ‘Closing Stop. Meanwhile, I will be a small buyer on any dip lower to 10290/10370 with the same 10195 ‘Closing Stop’. If I am taken short, I will have a T/P level at 10505. If I am taken long, I will have a T/P level at 10440. If this view changes, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
The Dow made a new all-time high at 52280 before falling 800 points into the close. This move lower saw my 51850 T/P level triggered on my latest 52060 short position and I am now flat. The Dow has short-term resistance from 52050/52350 where I will be a small seller with the same 52605 tight ‘Closing Stop’. If I am taken short, I will have a T/P level at 51740. I still do not want to be long the Dow at this time.
Cash NASDAQ 100
I am still flat as the NDX never came close to Wednesday’s sell range, ending the session lower with a 1% fall. On the back if the Iran deal being signed the NDX is trading back above 30100. Today, I will continue to be a seller from 30320/30520 with the same tight 30705 ‘Closing Stop’. If I am taken short, I will have a T/P level at 30130. I still do not want to be long the NDX at this time.
December BUND
I am still short the Bund at 126.70. I will add to this position at 127.50 while leaving my 128.05 ‘Closing Stop’ unchanged. I will now raise my T/P level to 126.30. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
My Gold plan worked well as the market sold off to my 4220-buy level before rallying over 1000 points. Unfortunately, I covered this position way too early at 4235 as I wanted to be flat overnight and I am still flat. I still believe that we are not done with the price of Gold moving lower. Despite this I have no interest in being short the market as this is too difficult a trade to manage. Gold has support below from 4080/4180 where I will be a strong buyer with a lower 3985 ‘Closing Stop’. If I am taken long, I will have a T/P level at 4290.
Silver Rolling Contract
No Change: Today, I will again be a buyer on any dip lower to 63.00/66.00 with the same 61.55 ‘Closing Stop’. If I am taken long, I will have a T/P level at 68.20. If this view changes, I will be back with a new update for my Platinum Members.
Please Note: There will be no Daily Commentary tomorrow. Any of my calls that are not executed today and are subsequently triggered on Friday will see me return with updated emails for my Platinum Members.
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