Morning Wrap – Market Returns to Normalcy After Hawkish Fed Forecasts and a Mixed Warsh (11.08.2026)

📊 Macroeconomics & Central Banks

• Fed Rate Decision: The US Federal Open Market Committee (FOMC) maintained the benchmark interest rate in the 3.50%–3.75% range, as expected, marking the fourth consecutive meeting with no rate changes.

• Hawkish Dot-Plot: Macroeconomic projections, particularly the dot-plot, present a more hawkish outlook—especially for 2026. The new Fed Chair, Kevin Warsh, demonstrated a significantly more restrictive approach.

• Streamlined Statement: Over half of the content was cut from the official Fed statement, completely removing previous "doveish" mentions regarding potential rate cuts.

• Warsh’s Strategy: Fed Chair Kevin Warsh pointed to upcoming changes in data presentation, projections, and communication. However, he also noted that supply shocks remain the primary cause of inflation and described current interest rates as "rather restrictive."

• Shift in Sentiment: A large portion of Fed members now hold a more hawkish stance than they did in March, with the median interest rate forecast for the end of 2026 rising to 3.8%.

• Rate Hikes on the Table: Half of the FOMC members (9 out of 12) expect at least one more rate hike this year, citing a strong labor market and rising inflationary risks (especially after recent energy shocks). Meanwhile, Warsh categorically ruled out any revision to the 2% inflation target.

• New Zealand GDP Beat: Official Q1 2026 GDP data for New Zealand surprised markets to the upside, showing economic growth of 0.8% QoQ (against expectations of 0.9% and following a prior growth of 0.5%) and a 1.5% YoY increase (versus a 1.1% forecast).

• NZD Reaction: The positive data from New Zealand bolsters expectations for potential rate hikes and is helping the NZDUSD pair recover after its recent drop to its lowest levels since April.

🌍 Geopolitics

• US-Iran Breakthrough: The US and Iran have reportedly electronically signed a Memorandum of Understanding (MOU) implementing an immediate ceasefire on all fronts (including Lebanon), opening a 60-day window to negotiate a final peace treaty.

• Geneva Signing: The official signing and entry into force of the memorandum is scheduled for this coming Friday in Geneva, Switzerland, and is being hailed as a historic breakthrough.

• Key Provisions: The agreement includes a US commitment to lift the naval blockade within 30 days, unfreeze Iranian assets, completely waive sanctions, and immediately approve Iranian oil exports.

• Regional Reconstruction: A $300 billion reconstruction fund is to be established alongside regional partners. To restore normal shipping traffic and ensure safe maritime administration, Iran is launching official talks with Oman regarding the Strait of Hormuz.

📈 Stock Markets & Equities

• Wall Street Sell-off: US indices closed Wednesday's session with sharp losses. The S&P 500 shed 1.2% and the Nasdaq 100 dropped 1.34%, weighed down by the hawkish tone from the Fed and a sharp sell-off in the Treasury market.

• Thursday Recovery: Today’s session sees a reversal of yesterday's downward moves on Wall Street. US500 futures are already up 1.4%, while US100 futures are gaining 1.8%.

• Asian Markets: The Asian session brought a mixed but relatively stable opening with signs of cautious optimism, driven by strong euphoria in the tech sector.

• Milestone for KOSPI: The South Korean KOSPI index broke above the 9,000-point threshold for the first time in history, rising 1.5% in morning trading on the back of tech giants; SK Hynix shares jumped over 3% to new highs due to deliveries of its advanced HBM4E memory.

• Nikkei Gains: Japan's Nikkei 225 index posted a nearly 2% gain.

💱 Currencies

• Dollar Strength: The Dollar Index rallied sharply by about 50 pips immediately following the conclusion of the Federal Reserve's press conference.

• Focus on the Yen: Investors are keeping a close eye on the Japanese Yen (JPY) after the Bank of Japan (BoJ) raised interest rates to 1% last week. Combined with the Fed's hawkish stance, this is further tightening global liquidity conditions.

• Major Pairs: The main currency pair, EURUSD, fell yesterday from 1.16 down to the 1.15 level, while USDJPY pushed above the psychological barrier of 160.5.

🛢️ Commodities

• Oil Under Pressure: Global crude oil prices recorded sharp declines due to the market prospect of a swift return of Iranian supply following the geopolitical agreement.

• Brent Crude: Despite yesterday's volatility, Brent crude continues its downward trajectory and is trading below $78 per barrel today.

• Gold Volatility: Gold reacted negatively to the hawkish Fed, erasing all of its gains from earlier in the week and initially dropping to $4,250 per ounce.

• Precious Metals Rebound: The prospect of falling oil prices is benefiting precious metals. Furthermore, since Kevin Warsh did not turn out to be extremely hawkish, gold is rebounding today toward the $4,321 per ounce level.