The dollar edged higher ahead of the conclusion of the Federal Reserve’s two-day policy meeting, the first to be chaired by Kevin Warsh, with markets closely watching for any signs of a hawkish shift from policymakers. The Fed is widely expected to hold its benchmark rate steady in the range of 3.50 per cent to 3.75 per cent, though it may drop its easing bias from the policy statement. The United States central bank will also issue its Summary of Economic Projections and the closely watched “dot plot”, offering markets a window into how Federal Open Market Committee (FOMC) members view the direction of monetary policy.
All eyes will be on the post-meeting press conference, where any signals Warsh offers on the Fed’s outlook will be critical as inflation remains stubbornly above the central bank’s 2 per cent annual target. Warsh, appointed by President Donald Trump, has suggested he will adopt a different governing approach from his predecessor Jerome Powell, with one notable distinction being his reluctance to commit to holding press conferences after every policy meeting, a practice Powell had instituted. Powell remains a voting member of the FOMC as a governor.
With inflation likely to dominate the press conference, traders will also be listening for any comments from Warsh on alternative inflation gauges he is known to favour, including the Dallas Fed’s trimmed mean measure, which points to softer price pressures than headline Personal Consumption Expenditures (PCE). An interim agreement to end the Iran war has pushed oil prices lower and should help ease some inflationary pressure in the months ahead, though the pass-through to consumer energy prices may take time. Fed funds futures traders are currently pricing in 60 per cent odds of a rate hike this year.
The dollar showed little reaction, showing that United States retail sales increased more than expected in May 2026.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.11 per cent to 99.66, with the euro down 0.13 per cent at $1.1592. There is no change in policy expected from the Bank of England (BoE), leaving the focus on the tone of policymakers’ commentary. That commentary could be shaped in part by United Kingdom’s inflation data, which showed prices unexpectedly held at 2.8 per cent in May 2026, unchanged from the 13-month low reached in April 2026.
Markets currently see one BoE rate hike by year-end. Sterling was last down 0.19 per cent at $1.34. The yen firmed 0.12 per cent to 160.22 per dollar, still keeping traders on alert for potential intervention by Japanese authorities to support the persistently weak currency. The Bank of Japan raised rates to a 31-year high in a landmark step in its policy normalisation, signaling readiness to tighten further as it focuses on taming price pressures from the war-induced energy shock.
However, policymakers offered few clues on the timing of the next move. Sweden’s crown weakened after the Riksbank held its policy rate unchanged. The Iran war had intensified inflationary pressures, raising the likelihood of a future rate hike, while also noting that underlying inflation remained subdued and economic activity was somewhat below normal. The Swedish crown was last down 0.19 per cent versus the dollar at 9.39.