A split Fed, record stock indexes and a yen at 40-year lows — the second half of 2026 is off to anything but a quiet start.
The minutes: a committee cut down the middle
The minutes of the June 16-17 FOMC meeting, released on Wednesday, confirmed what the market had been sensing for weeks: the Federal Reserve is genuinely divided. The committee voted unanimously to hold the federal funds rate at 3.50%-3.75%, but the projections behind that decision tell a different story — nine of the eighteen participants who submitted forecasts expect at least one rate hike before year-end, while eight see no change at all.
That is about as close to a coin flip as Fed policy gets. Chair Kevin Warsh has reinforced the uncertainty by signalling that the Fed intends to move away from traditional forward guidance, meaning traders can no longer lean on a well-telegraphed path. Every data release between now and the next meeting carries more weight, and the rates market has been repricing accordingly.
Stocks: records with a rotation underneath
Equities came into July riding their best quarter in years. The Dow Jones Industrial Average closed at a record 53,055.91 on Monday and printed a fresh intraday high on Tuesday before easing back. The S&P 500 has been hovering around the 7,500 mark — it gained 0.7% to 7,537 after the Independence Day holiday, then slipped 0.45% to roughly 7,504 as investors rotated out of technology.
The rotation is the story under the surface. Semiconductor names bore the brunt of the selling: Micron dropped 4.7% in a single session, with Broadcom, AMD, KLA and Marvell also lower, while Nvidia shed around 1%. Money has been flowing toward industrials and other traditional sectors — a classic broadening-out pattern that bulls read as healthy and bears read as fatigue in the leaders. European stocks, helped by a softer dollar, have also been setting record highs.
Second-quarter earnings season is now the next catalyst. PepsiCo reported on Thursday and Delta Air Lines follows on Friday, an early read on the consumer and on summer travel demand before the banks and big tech take over the tape.
Forex: soft dollar, heavy yen
In currencies, a weaker-than-expected June US jobs report knocked the dollar lower. EUR/USD pushed back above 1.14 and has been trading near 1.144, helped by a rebound in eurozone investor confidence and stronger German industrial production — though gains were capped after eurozone inflation undershot expectations at 2.8% headline and 2.4% core, and ECB President Christine Lagarde struck a dovish tone at the Sintra forum. Sterling has held near 1.34.
The exception to dollar softness remains the Japanese yen, which is trading above 162 per dollar — its weakest level in roughly four decades. Speculation about intervention from Tokyo builds with every push higher in USD/JPY, and the pair has become the market's favourite venue for testing officials' pain threshold.
What traders are watching
A divided Fed with no forward guidance, indexes at records and a one-sided yen trade: volatility is not being priced out of this market any time soon. Manage your risk accordingly.
This article is for informational purposes only and is not investment advice.
The minutes: a committee cut down the middle
The minutes of the June 16-17 FOMC meeting, released on Wednesday, confirmed what the market had been sensing for weeks: the Federal Reserve is genuinely divided. The committee voted unanimously to hold the federal funds rate at 3.50%-3.75%, but the projections behind that decision tell a different story — nine of the eighteen participants who submitted forecasts expect at least one rate hike before year-end, while eight see no change at all.
That is about as close to a coin flip as Fed policy gets. Chair Kevin Warsh has reinforced the uncertainty by signalling that the Fed intends to move away from traditional forward guidance, meaning traders can no longer lean on a well-telegraphed path. Every data release between now and the next meeting carries more weight, and the rates market has been repricing accordingly.
Stocks: records with a rotation underneath
Equities came into July riding their best quarter in years. The Dow Jones Industrial Average closed at a record 53,055.91 on Monday and printed a fresh intraday high on Tuesday before easing back. The S&P 500 has been hovering around the 7,500 mark — it gained 0.7% to 7,537 after the Independence Day holiday, then slipped 0.45% to roughly 7,504 as investors rotated out of technology.
The rotation is the story under the surface. Semiconductor names bore the brunt of the selling: Micron dropped 4.7% in a single session, with Broadcom, AMD, KLA and Marvell also lower, while Nvidia shed around 1%. Money has been flowing toward industrials and other traditional sectors — a classic broadening-out pattern that bulls read as healthy and bears read as fatigue in the leaders. European stocks, helped by a softer dollar, have also been setting record highs.
Second-quarter earnings season is now the next catalyst. PepsiCo reported on Thursday and Delta Air Lines follows on Friday, an early read on the consumer and on summer travel demand before the banks and big tech take over the tape.
Forex: soft dollar, heavy yen
In currencies, a weaker-than-expected June US jobs report knocked the dollar lower. EUR/USD pushed back above 1.14 and has been trading near 1.144, helped by a rebound in eurozone investor confidence and stronger German industrial production — though gains were capped after eurozone inflation undershot expectations at 2.8% headline and 2.4% core, and ECB President Christine Lagarde struck a dovish tone at the Sintra forum. Sterling has held near 1.34.
The exception to dollar softness remains the Japanese yen, which is trading above 162 per dollar — its weakest level in roughly four decades. Speculation about intervention from Tokyo builds with every push higher in USD/JPY, and the pair has become the market's favourite venue for testing officials' pain threshold.
What traders are watching
- Whether the 9-8 split hardens into an actual hike — CPI and the next jobs report are now live events.
- Q2 earnings breadth: if the rotation out of tech continues, leadership needs to come from somewhere else.
- USD/JPY above 162 and the risk of sudden intervention-driven reversals.
- EUR/USD between a dovish ECB and a directionless dollar, with 1.18 still a popular year-end call.
A divided Fed with no forward guidance, indexes at records and a one-sided yen trade: volatility is not being priced out of this market any time soon. Manage your risk accordingly.
This article is for informational purposes only and is not investment advice.