Hawkish Fed and Warsh Pivot Push US Dollar to Year-to-Date Highs

The US Dollar Index (USDX) surged to a new year-to-date high on Thursday, rising by 0.46% and hitting its strongest level since May 2025, fueled by a hawkish policy pivot from the Federal Reserve. Under the leadership of new Fed Chair Kevin Warsh, the central bank held interest rates steady at 3.50%–3.75% but removed references to "additional rate adjustments" in favor of a data-dependent approach centered on price stability. Furthermore, the meeting revealed that 9 out of 19 policymakers anticipate another rate increase by the end of the year, driving market expectations for a December hike up to 85%. Supportive domestic data, including a dip in weekly jobless claims to 226K, further reinforced greenback strength ahead of high-tier economic data releases scheduled for next week.

This dollar strength kept heavy pressure on majors, pushing the GBP/USD pair 0.74% lower toward 1.3210 on Thursday. The drop marked a near two-month low as the Pound struggled to find momentum against the firm greenback. The Bank of England (BoE) had previously opted to maintain its benchmark interest rate at 3.75% in a 7-2 split vote, with the majority advocating for patience given recent energy price volatility and an inflation rate that has ticked up to 3.3%. While two hawkish dissenters voted for a rate hike to 4.00% due to ongoing inflation concerns, the central bank’s cautious, wait-and-see tone ultimately limited the currency's upside, leaving sterling vulnerable to the Federal Reserve's more aggressive policy messaging.

Wall Street rallied on Thursday as global risk sentiment was strongly boosted by an unexpected interim peace accord between the United States and Iran. Inked by President Donald Trump and Iranian President Masoud Pezeshkian, the agreement immediately halts military operations across all fronts, establishes a 60-day negotiation window for a permanent deal, and binds Iran to specific nuclear material commitments. Crucially, the accord reopens the strategic Strait of Hormuz without tolls, a move that significantly eased global energy supply anxieties and stripped the geopolitical risk premium out of the commodities market.

This diplomatic breakthrough allowed major U.S. stock indices to firmly rebound from Wednesday’s slump, which had been triggered by the Federal Reserve projecting an additional rate hike and new Chair Kevin Warsh announcing a sweeping review of central bank practices. Thursday's broad upward move saw a generalized advance across benchmark indices; tech-heavy and large-cap growth sectors led the charge, while blue-chip equities posted more modest but steady gains. The session also experienced heightened trading volume and volatility due to a record-setting, $8.3 trillion "triple witching" options expiration, which was pulled forward by a day ahead of Friday’s Juneteenth market holiday.

Among individual stocks, Intel spiked by around 10.3% following statements from President Trump revealing that Apple had agreed to collaborate with the semiconductor firm to manufacture chips domestically. This news lifted the broader chip sector, including peers like Marvell and Micron, while Apple's own stock ticked slightly higher after CEO Tim Cook noted impending consumer price hikes to counter rising component expenses. Conversely, Accenture plummeted by roughly -17.63% after management lowered its full-year revenue growth guidance and disclosed over $4 billion spent on an aggressive cybersecurity acquisition spree.

Meanwhile, shares of SpaceX fell by around 4.5% in its second consecutive negative session as profit-taking accelerated following an extraordinary post-IPO surge that had briefly pushed its valuation past Amazon earlier in the week. Despite pulling back from these multi-trillion-dollar highs, the Elon Musk-founded company remains comfortably above its $135 initial public offering price. This baseline support follows Monday's disclosure that underwriters fully exercised their greenshoe option, bringing the company's total IPO proceeds to $85.7 billion

Looking ahead to next week, market participants will shift their focus toward crucial macroeconomic indicators and high-profile corporate earnings to gauge the durability of Thursday's momentum. On the data front, investors will closely analyze the final reading of Q1 Gross Domestic Product (GDP) and the Federal Reserve's preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, to calibrate their monetary policy expectations under Chair Kevin Warsh. This macroeconomic scrutiny will be accompanied by a heavy slate of earnings releases, starting on Tuesday with reports from economic bellwether FedEx and cruise giant Carnival Corporation, followed on Wednesday by crucial results from chip manufacturing leader Micron Technology.