Good morning traders. Hope the weekend gave you a minute to actually breathe, because this week is not going to offer many of those.
Last week was a slow grind in a tight range while everyone waited for two things. We are about to get both of them in the same seventy two hours.
Wednesday June 17. FOMC Decision.
This is the one everyone has had circled for weeks. The base case across the market is a hold at 3.50 to 3.75%, and that part is genuinely not the story. The story is the dot plot.
Going into this meeting, inflation data has been running hotter than the Fed projected back in March. Watch two things in the Summary of Economic Projections. First, where the median 2026 PCE forecast lands. If it moves materially higher than the prior projection, that is the market's confirmation that the committee sees this inflation problem as more than transitory noise. Second, watch the dots themselves. Any meaningful shift toward officials projecting a hike rather than a cut by year end would be a genuine regime change in how this market has been positioned since the start of the year.
Kevin Warsh's press conference language matters as much as the numbers. Hawkish framing here does not just move the Dollar for an afternoon. It resets the entire rate path narrative heading into the second half of the year.
And Somewhere In The Middle Of That, A Peace Deal
This is the part that makes this week unusually layered. Mediators announced a sixty day memorandum of understanding between the United States and Iran late last week, with formal signature expected this week. The Strait of Hormuz has reopened to traffic, which has already been pulling oil prices down off their highs.
If that holds, it is disinflationary at the margin right as the Fed is deciding how hawkish to lean. If it does not hold, and Israel remains notably outside this round of the agreement, oil snaps back fast and undoes whatever relief the market priced in. Two of the biggest macro stories of the year are colliding in the same week and they are pulling in opposite directions on inflation. That is not a coincidence traders get to enjoy very often.
EUR/USD Into The Decision
Euro has been consolidating in the 1.1585 to 1.1685 range for going on three weeks. With the ECB already running hotter on hikes than markets expected at the start of the year, and the Fed decision landing midweek, this pair is sitting right at the fault line between two central banks. A hawkish Fed surprise pushes this back toward 1.1525 to test that support. A dovish surprise, or a Fed that simply holds steady language while the Iran news improves risk appetite, opens room back toward 1.1850.
I am not pre committing a direction here. I want to see how price reacts in the first hour after the decision before sizing anything meaningfully into Thursday.
Gold and the Bond Market
Treasuries have already been leaning into higher yields for weeks. Ten year paper sitting up near 4.49 percent and the thirty year near 4.93 percent tells you the bond market has been front running a hawkish outcome before the meeting even happens. If the dot plot confirms that lean, do not be surprised to see yields push further and gold come under renewed pressure even with the geopolitical backdrop still unresolved. Structural gold demand has not gone anywhere, but a genuinely hawkish surprise this week is a real headwind in the short term.
The Bottom Line For This Week
Wednesday is the fulcrum. Everything before it is positioning. Everything after it is reaction. Layer in a fragile, possibly historic Iran memorandum getting signed in the same stretch and you have a week where the macro calendar and the geopolitical calendar are both demanding your attention at the same time.
Here at Cayman we will be on the Telegram through the decision and through the signing ceremony, breaking down what actually moved and why, in real time rather than three days later.
Levels, bias, and session notes all week on the Telegram. See you in the channel.