Fed Turns More Hawkish, Dollar Surges, Gold and Silver Tumble

Market Overview

The Federal Reserve's policy decision and a stronger U.S. dollar dominated overnight trading. While the Fed left interest rates unchanged, its updated dot plot took a noticeably more hawkish tone. Nine of the 19 policymakers now expect at least one rate hike this year, while six anticipate two or more increases.

In his first press conference as Fed Chair, Christopher Waller reaffirmed the central bank's unwavering commitment to its 2% inflation target. The hawkish shift fueled a sharp rally in the U.S. Dollar Index, which surged 0.86% to its highest level in two months.

The stronger dollar and tighter policy expectations weighed heavily on risk assets and precious metals. Spot gold fell 1.64% to $4,258 per ounce, while silver plunged nearly 3%.

U.S. equities closed broadly lower. The S&P 500 declined 1.21% to 7,420, while the Nasdaq Composite dropped 1.35%. Meta led losses among the Magnificent Seven, falling more than 5%, while SpaceX recorded its first decline since going public, shedding nearly 5%. In contrast, the Philadelphia Semiconductor Index (SOX) outperformed, rising 1.38%.

In energy markets, WTI crude oil experienced significant volatility around the $76 per barrel level before finishing little changed. The U.S.-Iran memorandum of understanding has officially taken effect and is scheduled for formal signing on June 19.

Meanwhile, Chinese equities outperformed global markets. The STAR 50 Index surged more than 4%, while the ChiNext Index gained 1.56%. U.S. retail sales also surprised to the upside, rising 0.9% month-over-month in May, marking the strongest increase in more than three years.

Investors are now turning their attention to the Bank of England's interest rate decision and upcoming U.S. labor market data.

Key Themes to WatchGlobal Central Banks Continue to Diverge

The Federal Reserve's hawkish dot plot and removal of explicit rate guidance underscore a more restrictive policy stance. In his debut appearance as Fed Chair, Waller reiterated the Fed's commitment to restoring inflation to 2%.

Elsewhere, the Bank of Japan has raised rates to 1%, the highest level since 1995, while the Bank of Korea has lifted rates to a three-decade high and warned of growing risks of self-reinforcing inflation.

Attention now shifts to today's Bank of England policy announcement. With inflation proving increasingly sticky across major economies, central banks are generally leaning toward tighter monetary policy. The resulting interest-rate differential has helped revive dollar strength, putting short-term pressure on emerging-market currencies and precious metals.

U.S.-Iran Agreement and the Outlook for Oil Prices

The U.S.-Iran memorandum of understanding has officially entered into force and is set to be formally signed on June 19.

Key provisions include the immediate removal of sanctions on Iranian crude oil exports and a commitment by both sides to restore the Strait of Hormuz to full operational capacity within 30 days.

President Trump emphasized that the memorandum is not the final agreement and warned that pressure could be reinstated if Iran fails to comply with its commitments.

The fading geopolitical risk premium in the Middle East has weighed on crude prices. However, U.S. crude inventories fell by 8.26 million barrels, while stockpiles at the Cushing hub dropped to their lowest level since 2014. Going forward, oil prices are likely to balance between recovering supply and historically tight inventories.

Today's Key Events

• Bank of England Interest Rate Decision

• U.S. Initial Jobless Claims

• U.S. Treasury International Capital (TIC) Flows for April

• RMB Share of Global Payments (SWIFT) for May

• Formal Signing of the U.S.-Iran Memorandum of Understanding (June 19)

• 2026 Lujiazui Forum Continues (June 17-18)