Euro Folds As The Fed Trades Cuts For Hikes

The Federal Reserve (Fed) left the federal funds rate at 3.50% to 3.75% on Wednesday, but the hold was the least interesting part of Kevin Warsh's first meeting as Chair. The Federal Open Market Committee (FOMC) delivered it on a unanimous 12 to 0 vote, a sharp break from April's fractured 8 to 4 split, and the statement dropped its easing bias entirely. The language on the timing of future adjustments vanished, replaced by a flat pledge to restore price stability.

The updated Summary of Economic Projections (SEP) did the real damage. The median 2026 federal funds projection jumped to roughly 3.8% from 3.4% in March, flipping the signal from a cut to a hike bias. The driver was a startling inflation revision: the median 2026 Personal Consumption Expenditures (PCE) forecast leapt to 3.6% from 2.7%, with the core reading marked up to 3.3%. The Fed has not merely shelved cuts; it has joined the hawks.

EUR/USD bore the brunt, falling close to 50 pips on the release from just below 1.1600 to the 1.1550 region, its lowest print of the day after a quiet, range-bound session.

The bias is bearish while price holds beneath 1.1550, with 1.1500 the obvious magnet below; only a reclaim of 1.1600 would suggest the move is being faded. Attention now turns to Warsh's first press conference as Chair at 18:30 GMT, the first test of how firmly he stands behind the hawkish dots.

EUR/USD 5-minute chart