The trading day opens with a market environment that closely mirrors the prior session, driven by a combination of geopolitical headlines and macroeconomic data. The dominant narrative is the apparent progress toward a US-Iran deal, the continued downward drift in crude oil prices, and anticipation surrounding the first Federal Open Market Committee (FOMC) meeting led by new Federal Reserve chair Kevin Warsh.
The US-Iran Deal Moving Toward a Friday Signing
Despite ongoing regional tensions — including persistent friction between Israel and Lebanon — the US-Iran arrangement appears to be advancing. The situation is moving toward a Friday signing, and Iran has confirmed that the memorandum of understanding has been received and signed. The full process is expected to be completed on Friday.
A key element of the agreement is that the United States has confirmed the end of the US blockade on Iranian ports. In addition, the Strait of Hormuz — a critical maritime chokepoint for global oil shipments — will be opened once the deal is signed on Friday. The combination of these developments is directly pressuring oil prices, which continue to trickle lower.
At the G7 summit, an important nuance emerged regarding the financial terms. President Trump told other world leaders that the US is "not putting money into Iran." Instead, the arrangement is described as proceeding in a piecemeal fashion: as long as Iran agrees to the necessary inspections and validations required to keep the process going, the country will be able to participate in and enjoy the world economy in the Middle East — provided everything proceeds as planned. The continuation of the deal is therefore conditioned on compliance with verification requirements rather than on direct financial transfers.
The Macro Backdrop
The broader macroeconomic setup is essentially identical to the previous day. Interest rates are lower, crude oil is lower, and the dollar is basically unchanged, sitting slightly lower on the day. This combination forms a consistent macro picture. The one notable exception is Bitcoin, which is slightly lower on the day, breaking from the otherwise repeated pattern. Gold, meanwhile, is up again this morning.
Stocks, however, are mixed and largely unchanged at the open, showing some hesitation after a substantial rally in the prior session. The equity market is not yet following the macro lead, but with the trading day just beginning, the question is whether stocks will eventually align with the supportive macro and geopolitical backdrop. All systems point toward the Friday signing, and the news headlines coming out of the G7 and broader geopolitics continue to reinforce the same setup as the day before.
A Regime Change at the Fed Under Kevin Warsh
Attention then turns to the first FOMC meeting under Kevin Warsh, an event widely characterized as a regime change at the Fed. There have already been several dissenters who are uncomfortable with language biased toward a rate cut — among them Beth Hammack, Neel Kashkari, and Lorie Logan. Warsh himself has adopted a combative, open posture, reportedly saying, "Let's have a family fight. Let's really talk it out."
A Feather or a Sledgehammer?
A central question is how Warsh will approach his first meeting and first press conference: whether he will come in "with a feather or with a sledgehammer." The expectation is that he will move gradually, slowly introducing his own framework for how he views the US economy, interest rates, and inflation rather than immediately overturning the process.
Trimmed Mean PCE and the Case for Lower Rates
A likely feature of Warsh's communication is the introduction of the "trimmed mean PCE," a measure developed by the Dallas Fed. This metric strips out the most extreme highs and lows in the data to smooth the inflation reading. Using this approach strengthens the argument for lower interest rates, because it removes the outliers that can distort the headline number. Warsh's base case is well established: he believes in a smaller Fed balance sheet and lower interest rates.
Wrangling Among Voters and Members
Achieving this shift will not be frictionless. There will be wrangling and internal discussion, in part because consensus requires moving a group of 12 voters and 19 members toward a new way of thinking. As a result, the meeting is expected to be interesting and to generate headlines, with dissents being a key thing to watch. A Summary of Economic Projections (SEP) will also be released, and the nature of the Fed's information and communications is itself a topic Warsh has flagged for potential change.
Changing How the Fed Communicates
Warsh may alter the way the Fed communicates and works. Historically, the Fed did not hold press conferences when it did not move on rates — press conferences were held only when a rate decision was made. The practice of holding a press conference after every single meeting was a more recent innovation under Jerome Powell. It remains to be seen whether Warsh will change the frequency of communication and the overall manner in which the Fed communicates. This points to an interesting period over the coming days and months under the new chair.
There is also a historical parallel in how markets once read Fed intentions. Before press conferences existed, observers looked to Alan Greenspan and his briefcase: a thick briefcase signaled that a rate call was likely coming. Warsh, by contrast, has openly said he wants a "messier Fed" — more thinking and less talking — and welcomes a genuine "family fight."
Inflation Prints and the Global Central Bank Story
The meeting comes against a backdrop of fresh inflation data. The Producer Price Index (PPI) and Consumer Price Index (CPI) released this week came in somewhat elevated, registering three-year highs. At the same time, oil prices have come down, creating a counterbalancing dynamic between firmer inflation readings and easing energy costs.
The story is also global. The Bank of Japan raised its rate to 1%, the first such move since the late 1990s. The European Central Bank delivered its first hike in three years. Together, these moves underscore a broad, worldwide tightening narrative occurring alongside the developments in the US.
A Big Miss on Housing
A significant focus for Warsh is the weakness in the housing sector, and the morning's data provided another clear indication of that weakness. Housing starts came in at 1.177 million — a big miss against expectations of roughly 1.43 million. Housing starts are measured each time a new foundation is poured or a home is begun, so the figure is a direct gauge of new residential construction activity.
Building permits were closer to expectations but still missed, coming in at 1.413 million versus a consensus of around 1.427 million. The result is a big miss on starts and a slighter miss on permits — overall, not a strong housing report.
This weakness is precisely why housing is likely to be a major focus for Warsh going forward. Because he favors lowering the balance sheet and lowering interest rates, his preferred policy direction would benefit housing, small business, and the US consumer — the very segments that appear to be lagging in the current economy.
Outlook
No major policy moves are expected at this meeting or this week. Instead, the market's interest centers on the direction in which the Fed's language may lean and on how Warsh chooses to position himself in his debut. With the new chair signaling openness, debate, and a willingness to rethink both the inflation framework and the Fed's communication style — all set against falling oil, a progressing US-Iran deal, firmer inflation prints, weak housing, and a tightening global central bank backdrop — the coming days promise to be consequential for the path of monetary policy.
