Newsletter · · Ashutosh Agarwal

Warsh's Hawkish First Fed Meeting Lifts the Dollar as Banks Flip to Bullish Calls - The Dollar Brief - Week of June 22, 2026

Kevin Warsh's first FOMC kept rates on hold but the dot plot turned hawkish, with nine officials now penciling in a hike, and the dollar ripped while the sell side flipped from bearish to bullish for the week of June 22, 2026. This issue tracks the regime hinge, the bull-bear standoff, and whether the hikes ever actually arrive.

The Dollar Brief

Week of June 22, 2026: Warsh's Hawkish First Fed Meeting Lifts the Dollar as Banks Flip to Bullish Calls

Week of June 15–22, 2026

Kevin Warsh's first FOMC meeting was supposed to be a quiet debut. Instead, a four-paragraph statement, a vanished dot, and nine officials suddenly pencilling in hikes lit a fire under the dollar and a cigarette under everyone's priors. The funny part: the new chair barely said a word about rates, the dots did the talking. Here's what the people who actually run the money said this week.

TL;DR

  • Warsh held at 3.50–3.75% but the dot plot screamed hawkish, nine of 18 officials now want a hike this year, and the dollar ripped on it. Markets are pricing roughly a 69% chance of a hike by September.
  • The sell side flipped from "bearish dollar" to "bullish dollar," with J.P. Morgan now targeting EUR/USD down toward 110–113. The skeptics (Joseph Wang, Peter Schiff, Arthur Hayes) think the hikes never actually come and the pop fades.
  • De-dollarization got airtime again, but the smartest version of the bear case isn't China, it's Washington's own fiscal arithmetic.

What's new

The dot plot did the heavy lifting. Warsh kept the funds rate at 3.50–3.75%, but the median projection penciled the appropriate rate up to ~3.80% by year-end, with core PCE seen at 3.6% this year easing to 2.3% next, per the live coverage on Power Lunch, "Federal Reserve keeps rates unchanged in Kevin Warsh's first FOMC Meeting". On Bloomberg Talks, "Instant Reaction: The Fed Decides", former Fed Vice Chair Rich Clarida called the nine-member hike count "certainly above what I've been thinking going into this meeting," and flagged the new closing line, "the committee will deliver price stability," with no mention of employment, as the tell on where Warsh is headed. That's an insider reading the institution he used to help run.

The dollar soared, and Warsh "doesn't seem scared to be hiking." On Squawk on the Street, "Warsh's Next Moves", CNBC's Sara Eisen pegged market odds at 69% for a September hike and framed the hawkish turn as proof "the Fed is independent." On Bloomberg Surveillance, "Kevin Warsh's First News Conference", Wolfe Research's Stephanie Roth argued Warsh "silences the critics who thought we would not have an independent Fed," noting he "doesn't seem to be somebody who was scared to be hiking."

The sell side flipped bullish the dollar. This is the development that matters for positioning. On At Any Rate, "Global FX: Bullish Beta, Bullish Dollar" (recorded June 18), J.P. Morgan FX strategy head Meera Chandan said the firm's year-ahead "bearish dollar" call has been junked: "instead of being bullish beta, bearish dollar, we are now bullish beta and bullish the dollar." Her EUR/USD target is already "out of consensus bearish at 113," shifting toward 112, "110 could also come into play." The math: ~100bp of rate-differential widening implies ~4.5% beta-adjusted upside; net, she sees "3% to 4%" dollar upside, material, but "a bounded move" and "data dependent." This is desk-level strategy, not punditry.

Stablecoins as a Treasury-demand machine. On The Mark Moss Show, "The Death of the Dollar Has Already Started", metals dealer Andy Schectman called the GENIUS Act "diabolically genius": from next January, dollar transactions moving over blockchain rails backed by "90-day or less" Treasuries create "synthetic demand for the front end of the treasury market," propping up bill demand while pinning overnight rates "at or near zero." Treat this as a provocative pundit thesis, not desk consensus, but the plumbing point (stablecoin reserves as a structural T-bill bid) is the same one a16z and others are making in less apocalyptic terms.

The debate: does the dollar pop hold?

Bull case. US exceptionalism plus yield supremacy, the dollar already out-yields more than half of global currencies (Chandan, At Any Rate). The structural bull, Brent Johnson, made his case on Macro Voices, "There's No Turning Back": de-dollarization is "largely a myth," reserve share has slipped mainly versus gold, not rival fiat, while FX turnover, cross-border lending and trade invoicing sit at record highs. His framing: if the dollar ever dies, "it's going to die of strength," because the rest of the world's "dual carry trade" forces dollar buying in stress. The tail-risk bull, Henrik Zeberg, went further on Wealthion, "The Final Melt-Up Before Everything Breaks": DXY to 120 in a coming credit crunch, "because the unraveling of things is going to require dollars," a liquidity-scramble call, not a fundamentals call, paired with long US Treasuries.

Bear/skeptic case. The most credible pushback is that the hikes simply don't happen. On Forward Guidance, "The Warsh Fed Will Look Nothing Like Before", ex-NY Fed trader Joseph Wang said flatly, "I don't think we'll hike this year," energy disinflation is coming and an equity wobble would kill the case, reading the task forces as Warsh "consolidating power" to push big structural change (he's hired the author of Project 2025's Fed chapter). If Wang is right, the rate-differential bid that's lifting the dollar is borrowed time. Arthur Hayes, on Markets Outlook, goes the other way on the same conclusion: Warsh is secretly a dove who "lacks the votes" for real tightening. And the perma-bear, Peter Schiff, on The Peter Schiff Show, argued the dollar's strength rests on "expectations that won't materialize" and that a couple of quarter-points wouldn't be enough anyway.

The academic middle ground is the one worth tattooing on the wall. On Marketplace, "When the going gets tough, just keep spending", the Peterson Institute's Maurice Obstfeld, CFR's Zoe Liu and GWU's Jay Shambaugh noted ~90% of international transactions still have the dollar on one side and ~60% of reserves are dollar-denominated. Erosion would be "gradual," unless policy speeds it up via "pressuring the Fed to lower interest rates" and "very, very large federal budget deficits." As Liu put it: "the only enemy to the U.S. dollar is not a rivaling currency… it's our own fiscal responsibility."

The trades in play

  • Long USD vs low-yielders. J.P. Morgan: short EUR/USD targeting 110–113; "G10 is chock full of high-beta low-yielders" that should stay under pressure if Fed hawkishness sticks (At Any Rate).
  • Long USD/JPY via options. On At Any Rate, "2H Vol Outlook", Arindam Sandilya favored dollar-yen calls and dollar-Swiss as cheap, well-priced expressions of the bullish-dollar view, with FX vol screening "two sigma too low."
  • Long bonds as the crash hedge (Zeberg, Wealthion), the dollar-strength trade for people who think the melt-up ends in a liquidity event.

Read-throughs

  • Yen intervention is back on the radar. On The MUFG Global Markets Podcast, "FX Crosscurrents", Derek Halpenny noted USD/JPY hit 161.81, 14 pips from the 2024 high, with IMM leveraged-fund yen shorts "back at the same level as in July 2024 when they intervened." His read: with US front-end yields rising, the MOF may "stand back" and let 161.95 break, opening a path to ~165. Watch the tape for an intervention headline.
  • The fade risk is the differential "petering out." Halpenny again, and this is the counter to his own desk's near-term dollar pop: "the interest rate differential driver that's helping the dollar will peter out," leaving "the scope for sustained US dollar appreciation… fairly limited," with fiscal and political drivers (a ~7% deficit, November midterms) reasserting on the longer trend.
  • Midterm risk premium is faint but real. On Lagniappe, "US-Iran MOU: Where Do the Markets Go Now?", the host flagged Polymarket pricing a 42% Democratic sweep, 36% split Congress and 17% Republican sweep, with midterm years historically running hotter on volatility.

What changed

A regime hinge. Coming into the year, the curve priced cuts; this week it prices hikes, and the sell side flipped from short dollar to long. The new variable is communication risk: Warsh is killing forward guidance, so the market is now learning a reaction function in real time rather than being handed one. As Halpenny put it, nobody should lean too hard on a dot plot "probably going to be abandoned relatively soon."