EBM NEWSDESK ANALYSIS
Kevin Warsh steps into Jerome Powell’s chair tonight with rate hikes on the table, a possible Dot Plot in his crosshairs, and markets drifting sideways at record highs.
Markets Pause as Fed Decision Looms
Global markets entered a holding pattern on Wednesday as investors declined to make significant moves ahead of the Federal Reserve’s first monetary policy meeting under new Chair Kevin Warsh. The gathering carries unusual weight — not because a rate change is expected, but because Warsh’s approach to central bank communication may diverge sharply from his predecessor’s, with potentially lasting consequences for how markets read Fed signals.
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SubscribeEuropean indices were mixed in early trade. Asian markets were mostly firmer. The real action, or the conspicuous absence of it, was in positioning: across equities, currencies and commodities, traders sat on their hands and waited.
Warsh and the Dot Plot Question
The most consequential decision tonight may not be on interest rates at all. Warsh has previously signalled discomfort with the Fed’s culture of continuous public commentary from its members, and there is credible speculation that he may use this quarterly meeting — which includes the Summary of Economic Projections — to announce the abolition of the Dot Plot, the chart showing FOMC members’ individual forecasts for the Fed Funds rate.
If that happens, markets lose one of their most closely watched forward guidance tools. The Dot Plot has become a primary mechanism through which investors price rate expectations months and quarters in advance. Its removal would force a significant recalibration of how the Fed communicates policy intent — and how markets respond to it.
On rates themselves, the CME FedWatch Tool currently prices a 60% probability of at least one rate increase before year-end, with a 40% chance of no change. Rate cuts are entirely off the table for 2026. Any signal tonight that the hiking cycle remains live would weigh on equities and support the dollar.
Wall Street Rotation Continues
Tuesday’s session on Wall Street produced a notable divergence. The Dow Jones briefly broke above 52,000 for the first time before closing at a fresh all-time high, while the Nasdaq 100 fell close to 2% as semiconductor stocks sold off sharply. The S&P 500 and Russell 2000 posted losses of 0.6% and 0.9% respectively.
The pattern reflects an ongoing rotation out of high-multiple technology names and into value stocks. Caterpillar — which bears no resemblance to a growth tech company — hit a fresh all-time high on Tuesday, having gained more than 270% since April last year. That single data point encapsulates the shift in capital allocation that has gathered pace through 2026.
SpaceX, the week’s dominant single-stock story following Friday’s IPO, has pulled back from Monday’s near-$230 high but stabilised around $210 — still 55% above its $135 offer price. Options markets open today, which is likely to inject additional volatility into the stock.
Asian Markets: BOJ Raises Rates to 31-Year High
The Bank of Japan raised its key policy rate by 25 basis points to 1.0% on Tuesday — its highest level since 1995 — in a move that was widely anticipated and produced a muted market response. South Korea’s Kospi led Asian gains on Wednesday, advancing 1.6%, with SK Hynix and Samsung Electronics rising 5.8% and 3.4% respectively on continued semiconductor optimism.
HSBC jumped 2% in Hong Kong after reports of a partnership with Google Cloud to expand its artificial intelligence capabilities — though the Hang Seng still closed down 0.7% overall. Japan’s trade deficit came in better than expected, while Core Machinery Orders recovered strongly from prior weakness.
UK Inflation Holds, Bank of England Decision Tomorrow
UK inflation held steady at 2.8% year-on-year in May, in line with the prior reading but marginally below expectations. The data reinforced the prevailing view that the Bank of England’s Monetary Policy Committee will leave rates unchanged at its meeting tomorrow. Sterling slipped modestly on the release before stabilising, with GBPUSD remaining rangebound.
Oil Stabilises; Gold Struggles at Resistance
Crude oil prices steadied after a fortnight of heavy selling. Front-month Brent has declined more than 20% from its peak hit two weeks ago, with WTI now trading less than $9 above its pre-war level from early March. Markets are broadly pricing in the reopening of the Strait of Hormuz following Friday’s planned signing of the US-Iran memorandum of understanding in Switzerland.
The medium-term oil picture, however, carries a deflationary undertone. OPEC+ has already increased production. Iranian supply is likely to return to the market officially once a deal is formalised. Combined with slowing global demand growth, the conditions for a supply glut are building — which could place sustained downward pressure on prices through the second half of the year.
Gold held above $4,300 but was struggling to sustain the momentum that carried it sharply off last week’s lows near $4,000. Resistance at $4,350 is proving stubborn, with $4,400 requiring a more extended period of consolidation before it can be meaningfully tested. Investors appear reluctant to add gold exposure ahead of tonight’s Fed announcement.
Bitcoin pulled back slightly from Monday’s highs but remained well above the $60,000 level it briefly breached twelve days ago. The daily MACD indicates building upside momentum. A sustained move through the $65,000–$70,000 resistance band would represent a significant technical development.
