Forex week in review 25/2026: Warsh's first Fed meeting trades cuts for hikes

The short version: the week started with a peace deal and finished with a rate-hike scare. Kevin Warsh's first meeting as Federal Reserve chair kept rates on hold but pushed the projected path for 2026 higher, and that one change in expectations did more to currencies than four other central bank decisions combined. The US Dollar Index pushed past 101.00 on Friday, a level last seen in mid-May 2025, according to FXStreet. EUR/USD lost 1.2%, GBP/USD 1.6% and USD/CHF gained 1.6%.

All weekly figures in this recap are taken from Yahoo Finance hourly data, measured from the Sunday evening open to the 5pm New York close on Friday. Different data providers will show closes a few pips apart; that is normal in a decentralised market and not something to worry about. If you are new to the idea that there is no single official price, our guide to how the forex market works explains why.

The backdrop going into the week

Two things framed everything. First, energy. The US–Israeli war with Iran, which began on 28 February, had pushed oil sharply higher in the spring and with it inflation almost everywhere. US CPI, released the previous week, showed annual inflation at 4.2% in May, its highest in three years, with core inflation at 2.9%. Brent crude was trading around $88 a barrel as the week began, according to a Newsquawk preview, well below its spring peak but still far above where it started the year.

Second, a new Fed chair. Kevin Warsh was chairing his first Federal Open Market Committee meeting, and the market wanted to know whether he would lean towards cutting rates, as the White House wanted, or towards fighting inflation. A Reuters poll cited in the same preview found 72 of 102 economists expected a hold. The real question was the dot plot, the chart of each official's projected rate path.

If you are not sure how central bank expectations move currencies, start with our guide to central banks and interest rates. The one-line version: currencies respond to changes in expected interest rates, not to the rate decision itself if everyone already knew it.

Monday 15 June: a deal, and a relief rally

Late on Monday, according to CNN reporting cited by FXStreet, US and Iranian officials virtually signed an agreement that would end the blockade of Iranian ports, reopen the Strait of Hormuz and begin 60 days of nuclear negotiations. The full text was not released.

Risk appetite jumped. The Nasdaq Composite rose more than 3% and the S&P 500 added 1.65%. The Dollar Index slipped 0.15%. Gold rose more than 2% and held above $4,300. GBP/USD reached a 10-day high above 1.3450 before closing roughly unchanged. AUD/USD gained more than 0.3%.

This is a useful reminder that a geopolitical headline and a rates story can pull in opposite directions in the same week. Monday's move was pure risk-on; by Wednesday it had been overwritten.

Tuesday 16 June: Japan hikes, Australia holds, China disappoints

The Bank of Japan raised its short-term policy rate by 25 basis points to 1%, as money markets had largely priced (Newsquawk put the probability at about 89% beforehand). One board member dissented. Governor Ueda was absent after being hospitalised, so Deputy Governor Uchida gave the press conference. The statement said the BoJ "will continue to raise policy rate in response to developments in economic activity, prices, financial conditions."

And the yen did almost nothing. USD/JPY stayed above 160.00. This is one of the most important things a newer trader can learn: when a decision is fully expected, the price has already moved. The yen needed a bigger surprise than a 25-basis-point hike to strengthen, because US rates were still several percentage points higher, and the gap between the two is what drives the carry trade. Our guide to swap and overnight financing explains why that interest differential matters to anyone holding a position overnight.

In Sydney, the Reserve Bank of Australia held its cash rate at 4.35%, as markets expected, after three hikes earlier in the year. Governor Michele Bullock called reports of a Middle East peace deal "welcome news" but did not rule out further tightening.

China's May activity data were mixed. Industrial production grew 4.5% year on year, above the 4.2% consensus, but retail sales fell 0.6% year on year against expectations of roughly zero. The Australian dollar is often traded as a proxy for Chinese demand, and AUD/USD slipped back to around 0.7050 on Tuesday.

Wednesday 17 June: the day that set the tone

Wednesday had three scheduled events, and each one pushed in the same direction.

UK inflation came in soft

UK CPI held at 2.8% in May. Consensus was about 3.0%. That took some pressure off the Bank of England to sound hawkish the following day, and the pound eased.

US retail sales came in strong

US retail sales rose 0.9% in May, against forecasts of around 0.5%. April was revised to 0.4%. The control group, which feeds into GDP, rose 0.7%. Sales at gas stations jumped, and economists also pointed to unusually large tax refunds. Remember that retail sales are not adjusted for inflation, so part of the rise was simply higher prices.

The Fed: a hawkish hold

The FOMC kept the federal funds target range at 3.50–3.75% by a 12–0 vote. The statement said inflation "remains elevated" and named energy as a source of supply-driven price pressure, and it cited uncertainty linked to the conflict in the Middle East.

The projections did the damage. The median projection for the funds rate at the end of 2026 rose to 3.8% from 3.4%. Nine of 19 policymakers projected a rate increase this year. The median 2026 PCE inflation forecast jumped to 3.6% from 2.7%, and officials no longer expected inflation to return to 2% until 2028. GDP growth for 2026 was trimmed to 2.2% from 2.4%. Warsh described the Fed's commitment to price stability as "unanimous and unambiguous" and announced a review of the Fed's communications, balance sheet framework and inflation models.

The market response, per FXStreet's end-of-day wrap:

• The Dollar Index surged towards 100.40.
• EUR/USD fell to near 1.1500, an eight-week low.
• GBP/USD dropped to a two-month low near 1.3270.
• USD/JPY climbed to around 160.80, close to a two-year high.
• AUD/USD fell towards 0.7000.
• Gold fell sharply to near $4,240.

Short-dated Treasury yields rose above 4.20%, a more than one-year high, according to FXStreet, while long-dated yields actually eased. That shape matters: the market was not pricing a stronger economy, it was pricing a tighter Fed.

This is what how economic data moves forex is all about. The decision was expected. The surprise was in the guidance, and the guidance moved the expected path of rates. For anyone holding positions through the release, spreads typically widen and fills can slip on events like this; our guides to spreads and commissions and slippage explain what that looks like from the trader's side.

Thursday 18 June: three more central banks

SNB holds at zero

The Swiss National Bank kept its policy rate at 0%, as all 35 economists in a Reuters poll had expected. It nudged its inflation forecasts for 2027 and 2028 up to 0.6% and 0.7%, and Chairman Martin Schlegel said the bank showed "an increased readiness to intervene in the foreign exchange market" if necessary. The franc edged lower: USD/CHF moved back above 0.8000, according to FXStreet, and the franc fell 0.2–0.3% against the euro to around 0.9215, according to XTB. Over the week, USD/CHF gained 1.63%, the biggest move among the majors we track here.

The Bank of England splits 7–2

The Bank of England held Bank Rate at 3.75%. Seven members voted to hold; Megan Greene and Huw Pill voted to raise it to 4%. In April the vote had been 8–1. The minutes noted CPI at 2.8% in May and included a sentence worth remembering: "Monetary policy cannot influence energy prices." The Bank's job, it said, is to stop an energy shock from becoming embedded in wider wage and price setting.

A more hawkish split is normally supportive for a currency. It did not help sterling much, because the dollar story dominated and because UK politics was about to take over.

UK labour data also landed: the claimant count rose by 31,200 against expectations of 25,800.

Makerfield votes

Thursday was also polling day in the Makerfield by-election, and the result was declared early on Friday. Andy Burnham, the Greater Manchester mayor, won with 24,927 votes, 54.8% of the total, a majority of 9,231 over Reform UK, according to the official parliamentary results. His return to Westminster opened a path for a challenge to Prime Minister Keir Starmer.

Friday 19 June: Juneteenth and thin liquidity

US markets were closed for the Juneteenth holiday, as was Hong Kong for the Tuen Ng Festival. Spot FX still trades on US holidays, but with New York largely absent, liquidity is thinner and ranges can be erratic. Our guide to forex market hours and sessions covers how holidays and session overlaps affect the market.

Sterling slipped after the by-election result: reports put the move at between flat and about 0.3% overnight, with GBP/USD trading around 1.32. The Dollar Index moved past 101.00, a level last seen in mid-May 2025.

By the close, GBP/USD stood at 1.3237, near the bottom of a week that had started at 1.3452. EUR/USD finished at 1.1473. USD/JPY closed at 161.28 after touching 161.81. AUD/USD closed at 0.7014.

Meanwhile WTI crude fell to about $72 a barrel, a multi-week low, according to FXStreet. That is the odd part of the week: oil fell, which should ease inflation fears, and yet the Fed's projections assumed more inflation, not less. The market chose to believe the Fed.

Pair by pair

EUR/USD: -1.20%

The euro had no real story of its own this week. The European Central Bank had already raised rates by 25 basis points earlier in June, so the policy gap was not obviously moving against the euro. This was a dollar move, plain and simple. The pair spent Monday and Tuesday below 1.1620, then dropped more than a big figure in two sessions after the Fed.

GBP/USD: -1.60%

Sterling had three headwinds: a softer-than-expected CPI print, a Fed that turned hawkish, and political uncertainty. The 7–2 BoE vote was the only thing pulling the other way. When a currency has more than one reason to fall, it tends to fall further than its neighbours, and cable underperformed EUR/USD by about 0.4 percentage points.

USD/JPY: +0.84%

A BoJ hike and a weaker yen in the same week looks strange until you remember that the gap between US and Japanese rates was still large and the Fed had just signalled it might get larger. Japanese officials had intervened to support the yen in late April and May, and USD/JPY was creeping back towards the levels where that happened.

AUD/USD: -0.92%

The RBA held, Chinese retail sales disappointed, and then the Fed lifted the dollar. The New Zealand dollar did even worse, and FXStreet's data showed the US dollar strongest against the kiwi over the week.

USD/CHF: +1.63%

The franc is usually a safe haven. This week the SNB's renewed talk of intervention, a zero policy rate and a hawkish Fed all pointed the same way.

Gold

Gold rose more than 2% on Monday on the peace headlines and a softer dollar, held above $4,300 on Tuesday, then fell to near $4,240 after the Fed. A metal that pays no interest becomes less attractive when expected rates rise, and the dollar's strength makes it more expensive for buyers in other currencies.

A worked example: what a 139-pip week means

EUR/USD fell from 1.1612 to 1.1473 over the week, or 139 pips. Here is what that looks like on a trading account. These numbers are illustrative; your broker's contract sizes and margin rules may differ.

• One standard lot of EUR/USD is 100,000 euros. Each pip is worth $10, so 139 pips is $1,390. Our guide to what a pip is shows the calculation.
• Under the ESMA retail leverage limit of 30:1 on major pairs, the margin for one lot at around 1.16 is about $3,870 (100,000 × 1.16 ÷ 30).
• A trader who bought one lot at Monday's open and held to Friday would have lost $1,390, which is about 36% of the margin posted, on a move that most analysts would describe as an ordinary hawkish repricing.

Now size it properly. A trader with a $10,000 account who wants to risk 1% ($100) and places a stop 50 pips away can trade 0.2 lots ($2 per pip). The same 139-pip move would still have stopped them out, but for $100 rather than $1,390. That is the whole argument for position sizing in one example. Most retail CFD accounts lose money, with brokers disclosing loss rates typically between 61% and 89%, and leverage magnifies losses just as fast as gains. Our leverage and margin guide is worth reading before you place a trade on a central bank day.

What this week teaches

1. The decision is rarely the news

The Fed, BoJ, RBA, SNB and BoE all did exactly what markets expected. The currency moves came from the projections and the vote splits. When you read an economic calendar, the consensus column tells you what is already in the price.

2. Rate differentials beat headlines over a week

Monday's peace deal was a genuine risk-on event and it was gone by Wednesday. A change in the expected path of US rates is a slower, more persistent force. That is why the BoJ could hike and the yen still weaken.

3. When the dollar moves, look at the whole board

Every major we track moved against the dollar. If you are long EUR/USD, short USD/JPY and long AUD/USD, you do not have three trades. You have one trade, short the dollar, three times over. Understanding currency pairs as two currencies at once helps you see this before it hurts.

4. Holidays are not days off for risk

Friday's thin New York session came straight after a hawkish central bank and a UK political result. Thin liquidity plus fresh news can produce sharp, erratic moves.

Scheduled next week (22–26 June)

These are the events on the calendar. We do not forecast how they will affect prices.

• Tuesday 23 June: flash PMI surveys for June, including the eurozone and the US.
• Wednesday 24 June: Australian monthly CPI for May (11:30 AEST).
• Thursday 25 June: US PCE inflation for May and the final estimate of first-quarter GDP.
• Through the week: the first round of Fed speakers since the meeting.

Next week's recap: forex week in review, 22–26 June 2026. The week before: forex week in review, 8–12 June 2026. For more context on why so many retail traders struggle in weeks like this, read why most retail CFD traders lose.

Sources

• Federal Reserve: FOMC statement, 17 June 2026
• Bank of England: Monetary Policy Summary, June 2026
• UK Parliament: Makerfield by-election result, 18 June 2026
• FXStreet: Forex Today, US dollar jumps after Warsh-led Fed holds rates
• FXStreet: Forex Today, BoJ hikes, RBA holds, markets await details of US-Iran deal
• FXStreet: US Dollar weekly forecast, the last mile just got longer
• FXStreet: Global macro transmission monitor, week ending 19 June 2026
• FXStreet: SNB keeps policy rate unchanged at 0% in June
• XTB: Swiss franc weakens after SNB keeps rates unchanged
• InvestingLive / Newsquawk: Week in focus, Fed, BoJ, RBA, BoE, SNB
• AP via WTOP: Retail sales up 0.9% in May
• US Bureau of Labor Statistics: CPI, May 2026
• RTTNews: U.S. dollar rises amid hawkish Fed policy outlook
• Yahoo Finance: EUR/USD historical data (also GBPUSD=X, JPY=X, AUDUSD=X, CHF=X)