Global markets are entering a new phase. The easing of Middle East tensions and Kevin Warsh’s first policy signals as Fed Chair are reshaping expectations across currencies, commodities, and equities.
Key Themes
US-Iran Deal Sends Oil Lower
• Washington and Tehran have agreed on a preliminary framework aimed at reopening the Strait of Hormuz and reducing regional tensions.
• The removal of the geopolitical risk premium has triggered a sharp decline in oil prices, with Brent slipping below $80 per barrel.
• Lower energy prices have eased pressure on inflation expectations and provided relief for several Asian currencies, including the Korean won and Indonesian rupiah.
The First Fed Meeting Under Warsh
• The Federal Reserve delivered its latest policy decision with Kevin Warsh leading the press conference for the first time.
• While falling oil prices have helped ease inflation concerns, Warsh emphasized that inflation remains above target and that the US labour market continues to show resilience.
• Notably, Warsh avoided giving clear guidance on future rate moves, leaving markets with more questions than answers about the Fed’s next step.
Dollar Index: Support Holds Above 100
The US Dollar Index has retreated alongside oil prices, but downside momentum remains limited. Strong labour market conditions and the Fed’s cautious stance continue to provide support near the key 100 level.
What to Watch Next
• US Initial Jobless Claims
• Comments from Fed officials as markets assess Warsh’s policy approach
Technical View
The medium-term bias remains mildly bearish as lower oil prices reduce inflation pressures. However, buyers continue to defend the 100 area, which remains a major technical support zone.
Bullish factors
• Resilient US labour market
• Data-dependent Fed policy approach
Upside targets: 101.50 → 102.20
Bearish factors
• Declining oil prices lowering inflation expectations
• Improving risk appetite supporting equities and higher-yielding assets
Downside targets: 100.00 → 99.50