by Coinstrooper Crypto Articles
Quick Take
  • It comes as energy prices retreat after the United States and Iran reached a framework deal to reopen the Strait of Hormuz.
  • Despite the recent decline in crude Oil prices, markets still see a relatively strong probability of the Fed tightening the policy later in the year.
  • With the latest deal finally paving the way for the reopening the Strait of Hormuz, WTI declined further and broke below $80.
  • Policymakers will take this development into account when penciling down their macroeconomic projections and interest rate expectations.

What Happened

The United States (US) Federal Reserve (Fed) announces its interest rate decision on Wednesday, another pivotal meeting for markets to gauge the stance of policymakers and new Chair Kevin Warsh.

According to the CME FedWatch Tool, investors are currently pricing in about a 58% probability that the Fed will raise the interest rate by 25 basis points (bps) at least once by end-2026.

After fluctuating at around $65 per barrel before the US and Israel launched a joint attack on Iran on February 28, the West Texas Intermediate (WTI) rose to its highest level since June 2022 above $110 by mid-March.

Since the first temporary ceasefire agreement between the US and Iran was announced in early April, Oil prices corrected lower but remained elevated relative to pre-war levels.

When will the Fed Announce its Interest Rate Decision and How Could it Affect EUR/USD?

The Fed is scheduled to announce its interest rate decision and publish the monetary policy statement, alongside the SEP at 18:00 GMT. This will be followed by Fed Chair Kevin Warsh’s press conference starting at 18:30 GMT.

Market Context

It comes as energy prices retreat after the United States and Iran reached a framework deal to reopen the Strait of Hormuz.

Markets widely expect the Federal Open Market Committee (FOMC) to keep interest rates unchanged in the range of 3.5%-3.75% for the fourth consecutive meeting in June.

As this decision is fully priced in, the revised Summary of Economic Projections (SEP) and Fed Chair Warsh’s comments in his first post-meeting press conference will grab all the attention as they could offer key clues on the policy outlook and thus drive the US Dollar’s (USD) performance.

Despite the recent decline in crude Oil prices, markets still see a relatively strong probability of the Fed tightening the policy later in the year.

Nevertheless, the market positioning suggests that the USD has room on the upside if the document shows that a majority of policymakers project at least one rate hike by the end of the year.

In this scenario, market participants could continue to price in a rate hike and fuel another leg higher in US Treasury bond yields and the USD, causing EUR/USD to stretch lower.

Although this would still be a hawkish revision when compared to the March SEP, it would still be a less hawkish outlook than what markets are currently expecting.

If Warsh pushes back market expectations for a rate hike and adopts an optimistic tone about the inflation outlook, now that Oil prices are coming back down, the USD could struggle to find demand.

In the less likely scenario, Warsh could acknowledge strong labor market data and refrain from delivering a dovish message.

Why It Matters

Policymakers will take this development into account when penciling down their macroeconomic projections and interest rate expectations.

Previewing the FOMC meeting, “the policy rate will remain unchanged with likely hawkish changes in communications,” said TD Securities analysts.

“The easing bias will be dropped with hawkish adjustments to the SEP and dot plot. The uncertainty lies in new Fed Chair Warsh’s press conference. A strong pushback from Warsh is unlikely as that would damage his credibility and effectiveness towards his long-term, reform-minded agenda,” they added.

Conversely, the USD could come under pressure if the SEP shows that a majority of policymakers expect to keep the policy rate unchanged for the rest of the year.

In this case, EUR/USD could gather recovery momentum.

Comments from Warsh in the post-meeting press conference could also drive the USD’s valuation.

Details

With the latest deal finally paving the way for the reopening the Strait of Hormuz, WTI declined further and broke below $80.

The latest SEP published in March showed that policymakers’ median projection pointed to a 25 basis points (bps) cut this year, unchanged from the SEP published in December 2025.

It won’t be a surprise if there are hawkish revisions in the SEP given the changes in the macroeconomic backdrop.