Wealthion Macro Bites 6-18
Ahead of a planned Friday signing in Switzerland, the U.S. and Iran remotely signed their 14-point MOU on Wednesday. The MOU stipulates Iran will “use its best efforts” to allow immediate passage for all commercial shipping through the Strait of Hormuz for a 60-day “toll-free” period, during which bilateral negotiations over Iran’s nuclear program will begin. In return, concessions to Iran include an immediate end to military actions, access to $100B in frozen Iranian assets, suspension of new sanctions, and pledge for an internationally funded $300B in investment capital to support Iran’s postwar reconstruction.
At its June meeting, the FOMC voted 12-0 to leave the fed funds target rate unchanged at 3.5%-3.75% but financial markets focused almost exclusively on movements in the Fed’s dot-plot. At the March meeting, 12 of 19 participants recorded dots forecasting between 1-and-4 additional ’26 rate cuts (with none expecting a rate hike). But at the June meeting, 9 of 18 participants’ dots forecast between 1-and-3 ’26 rate hikes (with 8 expecting no movement and 1 forecasting a rate cut). Of course, the sharp market reaction to these six-month forecasts (in an economic environment of such limited visibility) is the exact reason incoming Chair Kevin Warsh declined to submit a dot for the Fed’s SEP.
For those long favoring Fed self-evaluation, Chair Warsh did not disappoint. Along with his dot-plot pass, the Fed’s official statement was simplified to 130 words (from 341 in Apr.) and Warsh unveiled sweeping plans to form 5 task forces to reexamine Fed policies and procedures with respect to Communications (incl. speeches, policy statements, minutes, press conferences and the dot plot), Balance Sheet Policy, Data Collection & Analysis, Productivity & Jobs, and Inflation Framework. Warsh said task forces would be formed in two weeks with initial observations in the Fall, and final decisions by year end.
Stay tuned…
In the latest (ceremonial) Western accord, G7 leaders agreed on Wednesday to step up coordination to “cut reliance on China for critical minerals,” including plans to align stockpiling and launch a new platform with an expanded role for the International Energy Agency. Without naming China, the leaders said they aim to reduce dependence on any one supplier outside the G7 (and partner countries) for rare earths and permanent magnets to below 60% by 2030, with an ultimate goal of 50% "as soon as possible.” Targets for other critical minerals will be set before the end of ‘26.
In a 6/16 Withold Release Order (effective immediately), the US Customs and Border Protection will temporarily detain all imports of copper and copper products (at all U.S. ports of entry) from Serbia’s Chinese-owned mining company Zijin Copper over claims the goods were produced using forced labor.
S&P futures +0.55% and Nasdaq futures +1.2%. 10-year Treasury yield -3.4bps (4.453%). DXY dollar index +0.65%, spot gold -0.3% and spot silver -1.7%. Brent futures -1.3% ($78,55) and WTI futures -1.85% ($75.37). U.S. markets are closed on Friday for Juneteenth Holiday.
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