One of the most important tests for the dollar, yen, pound
Even two rate hikes were priced in, which would be very uncomfortable for the new FOMC chair and the Trump administration. Today, after the announced agreement with Iran, oil market pressure will start to ease, and keeping rates unchanged no longer requires a complicated defense. That does not change the fact that the week of central banks remains one of the most important tests for the dollar, yen, pound and global risk appetite this quarter.
The most important point of the week falls on Wednesday, June 17, when the Fed will announce its decision. The market’s baseline scenario is very clear: U.S. rates should stay in the 3.50‑3.75% range. After strong labor market data and higher inflation, the market has largely abandoned the idea of quick cuts, but has not yet received sufficiently hard arguments to price a move up (like the ECB).
That is why the decision itself may be less important than the Warsh conference and the new set of projections. Investors will look mainly at whether the Fed removes remnants of a previous easing stance and whether new dots show that the central bank wants to weather the second half of the year with a tougher stance on inflation, or whether it will show a neutral stance.
The dollar may give back part of its recent strength
From the market’s perspective, this is not a classic Fed that only decides on the level of rates. It is rather a Fed that must decide whether the last rise in yields and dollar strength was merely a reaction to an energy shock or the beginning of a more lasting shift in expectations. If Warsh sounds cautious but not hawkish, the dollar may give back part of its recent strength.
However, if he emphasizes the risk of entrenched inflation and leaves an open door to tightening later, the market may treat the Wednesday statement as a signal that U.S. cuts are pushed much further back than a few weeks ago. But that is not the Trump administration’s baseline scenario. The war does not end a few days before the meeting to count on a hawkish message; quite the opposite.
The day before, on Tuesday, June 16, attention will turn to the Bank of Japan.
Here the setup is almost the reverse of the U.S., because the market focuses much more on the move itself than on whether something will happen. The dominant scenario remains a 25‑basis‑point hike to 1%, the highest level since 1995.
That would be another step away from very accommodative policy and at the same time an attempt to respond to a weak yen and cost pressure in the economy. Market pricing and economist surveys have already shifted clearly toward such a move, so the key will be not only whether BoJ raises rates, but also how it describes the path for the second half of the year.
If Tokyo raises the cost of money while signaling caution about further moves, the yen’s reaction may be limited. If the statement shows readiness for further normalization, the market may again lift expectations for reaching 1.25% before year‑end. This is especially important because the yen remains one of the most sensitive currencies to the spread between Japanese and U.S. rates. In practice, the BoJ’s Tuesday decision could set the backdrop for the Wednesday Fed.
Thursday, June 18, will bring the culmination of decisions outside the U.S.
The Bank of England will likely keep the rate at 3.75%, but it will not be a neutral pause. The market increasingly accepts a scenario in which the British central bank leaves a wide door open for a later hike if inflation and wages do not slow. The Wednesday UK CPI reading will be key here, as it may decide whether the Thursday statement is read as a simple wait or a pause before a possible move in the fall. That is a significant difference for the pound.
On the same day, the SNB will also announce its decision. Swiss are today the least likely to surprise. With a 0% rate, low inflation, and a strong franc, the baseline scenario is no change. In this case, the market will look more for clues about the currency and potential readiness for intervention than a signal of a change in the cost of money. In other words, it is a bank that is likely to stabilize the environment rather than complicate it.
The situation in Norway looks more interesting
Norges Bank already surprised in May with a higher-than-expected hike to 4.25%, so a pause now seems most likely. However, it would not be a dovish pause. Persistent core inflation means the central bank may want to maintain a hawkish tone and remind the market that another upward move remains possible if price pressure does not weaken. For the Norwegian krone and the local market, it will be important not only what the bank does now, but whether it keeps a high valuation of further tightening.
So, in summary, the most priced-in move is the one in Japan. The Fed has the greatest ability to shift global expectations, even if it should not move rates. The Bank of England and Norges Bank will likely choose a pause, but with the caveat that the fight against inflation is not yet finished. The SNB remains the most predictable. Additionally, it appears that geopolitical de-escalation gives some central banks more room to wait without immediate tightening, as the ECB did.
