While Donald Trump previously criticized Jerome Powell for being reluctant to cut interest rates, he has now shifted the focus to the Federal Reserve as a whole. The argument is that Kevin Warsh would face a committee resistant to policy easing. Let’s examine the implications for monetary policy and develop a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
- The US labor market data disappointed.
- The Fed can shift its focus to inflation.
- The US administration is criticizing the central bank.
- Long positions on the EUR/USD pair can be considered with targets of 1.154 and 1.162.
Weekly Fundamental Forecast for Dollar
There is nothing in this report to suggest that the Fed should raise rates. The markets reached this conclusion, driving the EUR/USD pair above 1.147 amid a 57,000 increase in Nonfarm payrolls in June. The figure was expected to rise by 115,000—twice as much. Even the drop in the unemployment rate to 4.2% did little to sugarcoat the pill. The labor market is so tight that even with a negative nonfarm payrolls reading, the unemployment rate risks falling further.
US Nonfarm Payrolls
Source: Wall Street Journal.
In fact, the Fed does not make decisions based on a single report. Although the April–May figures were revised downward by 74,000, employment has grown by an average of 92,000 since the start of the year. This represents a significant improvement compared to the second half of last year. From July through December 2025, the figure declined by 8,000 per month. This gave the Fed grounds to cut rates.
Obviously, the June figures do not signal that rates should be raised. However, positive half-year inflation gives the Fed the opportunity to do what Kevin Warsh is talking about—focus on inflation. According to San Francisco Fed President Mary Daly, consumer prices will gradually slow down, as the effects of tariffs and the conflict in the Middle East are temporary, while the Fed’s monetary policy remains restrictive.
This scenario is the one I described after Kevin Warsh’s first press conference as Fed Chair. The central bank will not cut rates; the markets have gotten ahead of themselves; and hawkish rhetoric is necessary to gain credibility within the FOMC. Speeches of US officials confirm this.
According to Donald Trump, Kevin Warsh faces a resistant committee that is preventing him from doing what is necessary—cutting rates. White House National Economic Council Director Kevin Hassett believes that FOMC officials will vote to raise the federal funds rate just to annoy the US president. The White House needs a scapegoat, and while Jerome Powell used to be that scapegoat, now there is an entire committee.
Market Expectations for Fed Rate Hike
Source: Bloomberg.
In any case, futures market expectations for the extent of monetary tightening are continuing to decline, putting pressure on the US dollar. Stabilization in the global geopolitical environment could add to downward pressure on the USD Index. Donald Trump’s tariffs and the conflict in the Middle East have boosted demand for the greenback as a safe-haven asset. If that demand eases, it could provide a catalyst for further gains in the euro.
Weekly Trading Plan for EUR/USD
The assumption that the market had not yet realized Kevin Warsh’s strategy proved correct. As a result, long positions could be established on the EUR/USD at 1.1385. At the same time, the disappointing jobs report has pushed the price to the target at 1.1465. Fresh bullish targets are 1.154 and 1.162.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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Source: Original Article
