Market Highlight 19.05.2026

Kevin Warsh has secured confirmation as FED Chair on the basis of a dual policy agenda for the Central Bank: lower interest rates and a smaller FED balance sheet. President D. Trump is expected to host Warsh’s swearing-in ceremony at the White House this Friday. However, these policy objectives will be difficult to implement under current market conditions. The rapid rise in inflation over the past 2 months has made FED policymakers reluctant to cut rates in line with President D. Trump’s demands. The labor market has also shown signs of stability, further weakening the case for monetary easing. During his Senate confirmation hearing, Warsh suggested that he might encourage the FED to consider alternative inflation measures, which have recently pointed to more moderate price pressures. Warsh argued that there is still room for rate cuts, even with persistent inflation, partly driven by the war in the Middle East. The market is currently pricing in around a 50% chance that the Federal Reserve will raise interest rates before December 2026.

The USD fell 0,32% against most major currencies on Monday as markets assessed whether meaningful progress toward ending the war in Iran could be achieved in the near term, and whether Central Banks may need to raise rates if oil prices remain elevated. President D. Trump said on Monday that he had paused plans to attack Iran in order to allow negotiations to proceed, after Iran sent Washington a new peace proposal aimed at ending the war in the Middle East.

Domestically, interbank USD/VND traded mainly within the 26.355 - 26.360 range in the first session of the week. The effective daily ceiling remained unchanged at 26.387 compared with the end of last week.

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