The Federal Reserve announced its interest rate decision on Wednesday, marking another pivotal meeting as markets assessed the stance of policymakers under new Chair Kevin Warsh, amid retreating energy prices following a U.S.-Iran framework deal to reopen the Strait of Hormuz.
Markets widely expect the Federal Open Market Committee (FOMC) to maintain interest rates within the 3.5%-3.75% range for a fourth consecutive meeting in June. With this outcome fully priced in, attention has shifted to the revised Summary of Economic Projections (SEP) and Warsh’s inaugural post-meeting press conference, which may provide crucial signals on the policy trajectory and influence the U.S. dollar’s performance.
Despite declining crude oil prices, financial markets still anticipate a significant likelihood of tightening later this year. According to the CME FedWatch Tool, investors are pricing in approximately a 58% probability that the Fed will raise rates by 25 basis points at least once by the end of 2026.
Oil prices have retreated from war-driven peaks, with West Texas Intermediate (WTI) falling below $80 after initially surging above $110 in March following U.S.-Israel strikes on Iran. The recent de-escalation and new agreement pave the way for reopening the Strait of Hormuz, though prices remain elevated compared to pre-conflict levels. Policymakers are expected to factor these developments into their macroeconomic projections.
Previewing the FOMC meeting, TD Securities analysts noted that “the policy rate will remain unchanged with likely hawkish changes in communications.” They added that “the easing bias will be dropped with hawkish adjustments to the SEP and dot plot,” while acknowledging uncertainty surrounding Warsh’s approach: “A strong pushback from Warsh is unlikely, as that would damage his credibility and hinder his long-term reform agenda.”
Fed Decision Timeline and EUR/USD Implications
The Fed will announce its interest rate decision and policy statement, along with the SEP, at 18:00 GMT, followed by Warsh’s press conference at 18:30 GMT.
The March SEP indicated that policymakers’ median projection foresee a 25 basis point cut this year—an outlook that could shift given changing economic conditions. A hawkish revision in the upcoming SEP might reinforce market expectations for a rate increase, supporting the dollar and pressuring EUR/USD lower. Conversely, if most officials project no further tightening, the dollar could weaken and the euro might regain momentum.
Comments from Warsh’s first press conference will be equally critical. A reassuring signal on inflation falling in line with the Fed’s 2% target could undermine dollar demand. Alternatively, if he emphasizes robust labor markets and maintains a tightening bias, it could reinforce rate hike expectations.
ING strategists Francesco Pesole, Chris Turner, and Frantisek Taborsky observe that the dollar remains supported by strong U.S. data and Fed expectations despite lower oil prices, noting: “The Dollar can stay resilient, but needs a nod from policymakers—especially new Chair Warsh—that rate hikes are a real possibility. This keeps questions around the durability of the oil sell-off open, and FX markets are, for now, reluctant to fully price in that optimism.”
Eren Sengezer, FXStreet’s European Session Lead Analyst, provides a short-term technical view for EUR/USD: “The technical outlook is yet to point to a bullish reversal. On the daily chart, the RSI has recovered but has not decisively broken above 50. Additionally, EUR/USD remains below both the 100-day and 200-day simple moving averages.”
Looking ahead, key resistance for EUR/USD appears between 1.1655 and 1.1675, where the 38.2% Fibonacci retracement, the 100-day SMA, and the 200-day SMA converge. A breakout could expose 1.1730 (50% retracement) and then 1.1800 (61.8% retracement). Support levels lie at 1.1560 (23.6% retracement), 1.1500 (round level), and 1.1410 (March 13 low).
Warsh Leads a Committee Leaning Toward Tightening
New Fed Chair Warsh takes the helm of a committee dominated by hawkish voices. Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed President Neel Kashkari represent among the most pronounced hawkish sentiments, according to FXStreet Speechtracker metrics.
In a speech on May 27, Kashkari scored 7.4/10 on the Speechtracker—above the 7/10 historical average—emphasizing elevated inflation risks and cautioning that a Middle East shock could sustain global price pressures.
Logan, who scored 8.2/10 on June 3, struck a markedly hawkish tone, stating that “inflation is trending toward the mid-2s, not all the way to 2%” and that trimmed-mean inflation is “not currently a reliable signal.” Her remarks underscored concerns that inflation is slowing too slowly and that monetary policy remains accommodative, with corporate earnings “going gangbusters” and the labor market stable.
If Warsh aims to advocate for policy easing, he faces an uphill challenge. While figures like New York Fed President John Williams and Fed Governor Jerome Powell may favor maintaining current rates, neither is likely to back cuts absent clear signs of disinflation or significant labor market weakness.