Markets:
- Gold slipped $90 to $4,240
- US 10‑year Treasury yields rose 7 basis points to 4.49%
- US 2‑year yields climbed 17 basis points to 4.22%
- The US dollar gained ground while the New Zealand dollar and British pound lagged
- The S&P 500 fell 1.4%
This was not the Kevin Warsh that Trump had nominated with a mandate to cut rates. Instead, he presented himself as resolutely focused on driving inflation down to 2%, even at the cost of economic pain.
The market reacted sharply to his statement, which was brief and concluded with an emphasis on price stability. At first the remark seemed procedural, but as the press conference continued it became clear that we were hearing the 2010‑era hawkish Warsh, not the candidate who had campaigned sounding more like Stephen Miran.
Investors responded by buying the US dollar aggressively. The euro fell more than 100 pips to 1.1495, and the pound dropped even further to 1.3280 from 1.3400. Most major currencies moved around 1%, although the yen showed only a modest 20‑pip move to 160.66, reflecting some tolerance for intervention.
I expect further pressure as US 2‑year yields increased another 17 basis points to 4.21%. Markets now price in about 40 basis points of rate hikes this year, up from 21 basis points before the FOMC meeting, and even the July policy decision appears to be back in play. There was scant mention of the employment component of the Fed’s dual mandate.
