Dollar's Last Wild Card Unleashed: Will Fed Chair Warsh Steer Markets?
The US dollar may be about to unleash its last wild card, according to LiteFinance's forecast as of August 27, 2026. The market is waiting for clues from Fed Chair Kevin Warsh on whether inflation's reluctance to return to target is temporary or a reflection of a strong economy.
Warsh inherited an economic situation that can be viewed in two ways: either inflation is stuck above the target due to one-off factors, or consumer prices are high because of a strong US economy. The PCE report showed inflation remains nearly twice the Fed's target, pushing the odds of a September rate hike to almost 40% and allowing the US dollar to recover half of its losses.
The EUR/USD pair is being pressured by rising political risks in France and elevated natural gas prices, which are reminiscent of the 2022 energy crisis. If short positions on the EUR/USD formed at 1.17 are maintained, it may be better to adopt a wait-and-see approach and stay out of the market for now.
The best outcome for the US dollar would be for the Fed chair to endorse raising rates if the deflationary trend stalls, according to Standard Chartered Bank. Otherwise, if the central bank chief sends no signals, the USD index will plummet.