
Markets are two-minded about today’s FOMC meeting.
Driven by the rebound in Brent crude from $70 to $100 in the first three weeks of July, dollar bulls accumulated long USD positions, betting that Fed Chairman Kevin Warsh would deliver a surprise rate hike at his second meeting. The bond market brushed aside the lower-than-expected June US CPI readings and lifted the US 10-year bond yield briefly above 4.70% on July 23, up from its 4.37% low on June 26. It remains to be seen whether Warsh will reward the speculators for their efforts to work around his disdain for forward guidance.
The sceptics believe that these USD bulls have overpriced such hawkishness, banking too much on volatile energy prices rather than data. Brent fell in the past three sessions to $84 overnight, returning slightly more than 60% of July’s rally. The US Treasury 10-year yield eased, but hawks limited the decline to 4.60%, brushing aside the weakening US economic outlook. The Atlanta Fed’s GDPNow model projects US GDP growth decelerating to 1.54% in 2Q26, significantly below the average 3.1% estimated for the June 1-24 period and the 2% consensus in tomorrow’s advanced GDP report.
What markets are assured of is Warsh’s promise of “honest discussion” with his Fed colleagues and his commitment to end forward guidance. As in the June statement, there will be no breakdown of the votes in today’s rate decision or strong wording to indicate a hawkish or neutral hold. Hence, don’t hold your breath for any rate bias in the September meeting. Having established the task forces to review the Fed’s communications and forecasting frameworks in June, Warsh could hint at presenting preliminary findings to the dots and Summary of Economic Projections in September.
Hence, there is a risk that speculators may have to lighten their long USD positions if today’s FOMC meeting does not turn out hawkish enough to prompt a surprise hike today or to support a tightening in September.
Quote of the Day
“Correction does much, but encouragement does more.”
Johann Wolfgang von Goethe
July 29 in history
The International Atomic Energy Agency officially came into force in 1957 to safely regulate nuclear energy and discourage its military use.



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