Weekly Macro Overview: The world after the memorandum, new faces at the Fed, and the era of a strong dollar

This week marked one of the most significant macroeconomic turning points of 2026. The market effectively shifted from fears of a Middle East war to a reevaluation of the entire trajectory of US monetary policy. While just two weeks ago the main topics were oil, the Strait of Hormuz, and the risk of a new inflationary shock, today the focus has completely shifted to the Federal Reserve and new Fed Chairman Kevin Warsh.

The FOMC meeting itself was the key event of the week and triggered a massive realignment of expectations across all markets — from currencies to gold and bonds.

What has changed at the Fed

The Federal Reserve left rates unchanged, but it was one of the most hawkish meetings in recent years.

The main surprise came from the updated dot plot. In March, no FOMC member expected a rate hike in 2026. Now, nine out of eighteen committee members project at least one hike.

Several Fed members even see the possibility of two or three hikes in the coming months.

Thus, the Fed moved from a neutral stance to an actual tightening bias regime — a propensity for further policy tightening.

New Fed Chairman Kevin Warsh delivered an even more important signal. He virtually abandoned the traditional practice of detailed forward guidance and repeatedly emphasized only one thing:

The Fed must return inflation to 2%.

The market heard this very clearly. After years of concerns about political pressure on the central bank, investors saw the Fed's willingness to prioritize the fight against inflation again.

How market expectations changed

Before the meeting, the market was quite skeptical about the chances of rate hikes.

After the FOMC, the situation changed dramatically.

Currently, the market is pricing in approximately:

• 38 bps of hikes by year-end

• about 40% probability of a hike already in July

• over 70% probability of a hike by September

This was the main driver for all markets after the meeting.

But will the Fed really raise rates?

Here's where it gets interesting.

Despite the hawkish rhetoric, most macroeconomists do not yet believe that the Fed will actually implement the entire scenario priced in by the market.

The reason is simple: the fundamental inflationary picture is gradually improving.

After the resolution of the conflict between the US and Iran, oil prices fell sharply.

WTI dropped to approximately $76 per barrel.

This means:

• cheaper gasoline

• lower transportation costs

• less pressure on logistics

• easing inflation in the coming months

In addition:

• wage growth rates remain moderate

• rental inflation continues to decelerate

• the effect of last year's tariffs is gradually disappearing from statistics

Even the Fed itself forecasts a decline in Core PCE from 3.3% this year to 2.5% next year.

Therefore, the baseline scenario for many banks now looks like this:

The Fed wants to remain tough in communication, but actual rate hikes may never materialize.

New regime for the dollar

The biggest winner of the week was the US dollar.

Before the FOMC, the dollar was losing ground due to falling oil prices and the resolution of the geopolitical crisis.

After the meeting, everything changed.

Rising real rates in the US and renewed confidence in the Fed's anti-inflationary policy generated strong demand for the dollar across the market.

Investors began to close out the "debasement trade" theme, popular in recent years, where capital fled to gold, Bitcoin, and the franc due to fears that the Fed would be too dovish.

Now this narrative has been seriously shaken.

As long as the market believes in a tough and resolute Fed, interest in the dollar will persist.

What this means for the FX market

The main theme for the coming months is the widening of monetary divergence.

The US has become more hawkish.

Other central banks — on the contrary.

The Bank of England has effectively entered a wait-and-see mode.

Due to falling energy prices, inflation in the UK risks being lower than forecasts.

The market has almost ceased to believe in new BoE rate hikes.

This is negative for the pound.

The ECB remains relatively hawkish and may still raise rates once, but even there, the cycle is already nearing its end.

The most difficult situation is in Japan.

The Bank of Japan raised rates this week and signaled further policy tightening.

However, this was not enough.

After the hawkish Fed, USD/JPY again approached its highs.

If the dollar continues to strengthen, the market will increasingly talk about new currency interventions by the Japanese Ministry of Finance.

What happened to gold

This week was painful for gold.

At the beginning of the week, the metal looked very strong.

After the announcement of the memorandum regarding the war with Iran and the reduction of geopolitical risks, gold continued its previous growth and updated local highs.

But then the FOMC came.

Gold reacted classically.

Higher real rates.

Stronger dollar.

Less fear of inflation.

Less fear of uncontrolled issuance.

All of this was negative for the precious metal.

An additional blow was the reduction of Goldman Sachs forecasts.

The bank lowered its year-end target from $5400 to $4900.

The forecast still remains very positive, but the market heard a different message:

the best part of the rally may be already behind us.

Technically, gold dangerously approached the $4000 area.

What's happening with bonds

Another important signal of the week came from the US government bond market.

Yields rose.

But the most interesting thing is that real rates primarily rose, while inflation expectations declined.

This is a very positive signal for the Fed.

The market says:

"We believe the central bank has inflation under control."

That's why long-term rates remain relatively stable even despite a tougher Fed.

What this means for commodities

After the resolution of the conflict around the Strait of Hormuz, the market began to quickly remove the geopolitical premium from oil quotes.

The fall in oil creates a disinflationary effect for the entire global economy.

Winners:

• energy importers

• consumers

• transportation sector

• manufacturing

Losers:

• energy companies

• oil-exporting countries

• currencies heavily dependent on the energy market

That is why among the favorites of many currency strategists is now a long dollar against the Norwegian krone or the Canadian dollar.

Baseline macro scenario for the coming months

Currently, the market is moving towards the following consensus:

The world avoids an energy crisis after the resolution of the conflict with Iran.

Inflation gradually slows down thanks to cheaper oil.

The Fed remains maximally hawkish in rhetoric to restore confidence in the price stability regime.

The market will continue to price in rate hikes for some time.

The dollar receives support from higher real rates.

Gold and other anti-dollar assets face a period of correction.

The main risk to this scenario is if US inflation and labor market data begin to deteriorate sharply. Then the market will quickly return to expectations of a pause or even future rate cuts.

As of the end of this week, the main conclusion is simple: the world has shifted from fear of war to fear of a tougher Fed, and as long as this theme remains dominant, the dollar has an advantage over most currencies, and it will be difficult for gold to return to its previous upward momentum.