Fed’s Warsh scraps guidance; S&P slides, GBP/USD tests support

The Federal Reserve on Wednesday kept the federal funds rate at 3.50%–3.75% and removed traditional forward guidance from its policy statement. Chair Kevin Warsh gave a shortened press conference and announced five internal reviews of the Fed’s balance sheet, communications and inflation models.

The Fed’s updated projections showed nine of 19 officials expect at least one rate increase before the end of 2026. Traders reduced bets on near-term easing following the revised dot plot and the change to the Fed’s communications approach.

U.S. equity benchmarks fell in late New York trading. The S&P 500 closed about 1.2% lower, the Nasdaq 100 declined roughly 1%, the Dow Jones Industrial Average dropped 507 points to 51,498, and the Russell 2000 fell 0.7%. Treasury yields rose across the curve. An estimated 30-year fixed mortgage rate increased to 6.62% from 6.54% the previous day.

The dollar strengthened, pressuring the euro and the pound, which each fell about 0.9–1% by the close. The Japanese yen traded near the intervention threshold around 160.65 per dollar.

Sterling tested short-term technical support ahead of the Bank of England decision scheduled for 7:00 p.m. SGT. GBP/USD dropped to the 1.3280–1.3262 band after retesting a medium-term ascending trendline in place since Nov. 4, 2025. Short-term momentum indicators registered extreme oversold readings and have begun to recover. Market participants are watching 1.3325 for a near-term upside break and 1.3262 for a downside hourly close that would expose further intraday supports near 1.3237 and 1.3210.

In energy markets, an interim U.S.-Iran agreement to restore toll-free commercial shipping through the Strait of Hormuz supported equity futures and coincided with a slight drop in front-month Brent crude to about $78.66 a barrel. The International Energy Agency warned that global oil inventories could reach historic lows in coming months and said operational bottlenecks, including demining, insurance adjustments and logistical constraints, will slow the return of full physical exports.

Spot gold fell about 1.7% as rising nominal yields reduced demand for non-yielding assets.

President Donald Trump told reporters, “It's all right, whatever,” when asked about the Fed decision and added another hike “could happen,” while expressing confidence in Chair Warsh's stewardship.

The Fed action and subsequent market moves occurred on Wednesday in Washington and affected trading in U.S., European and Asian markets over the following sessions.