Meanwhile, FX markets are clicking into gear. The euro, the pound sterling, and a broad range of other risk assets are staging a confident recovery against the US dollar, clawing back recent losses. This rally is taking place against a backdrop of events that could materially affect the US financial architecture.

The main catalyst driving interest in today's events is the upcoming testimony of Kevin Warsh. Nominated by Donald Trump to lead the Federal Reserve, Warsh will appear before the Senate Banking Committee today for confirmation hearings. These hearings promise to be among the tensest and most controversial in recent decades, given his well-known views on monetary policy and the potential impact on the Fed's future course.

The outcome of these hearings and the subsequent Senate vote will directly determine the next steps for the world's largest central bank. Installing a Fed chair whose views may differ from the current course would inevitably prompt a global reassessment of risks and investment strategies. Such uncertainty typically favors more volatile but potentially higher-return assets, while safe-haven instruments like the US dollar can lose appeal.

After his opening remarks, Warsh will take lawmakers' questions on a wide range of topics. Many are expected to probe the Fed's independence. Given Warsh's support from the president, some senators have expressed concerns on this point. Trump has made it clear he wants the next chair to move toward rate cuts. Economic research shows that countries that protect monetary policy from political interference tend to enjoy lower inflation. Warsh will therefore face questions testing his ability to soothe the White House while assuring markets that his policy proposals will be dictated by economic needs, not by Donald Trump.

Rate guidance will be another key focus. In July 2025, Warsh said interest rates should be lower, effectively endorsing Trump's stance. In the months before his nomination, he argued that technological advances, including AI, would boost growth without sparking higher inflation, giving the Fed room to cut rates. But the US-Iran war changed the landscape, and policymakers have since converged on the view that there is no urgency to rush rate cuts.

Another important issue is the Fed's balance sheet, which Warsh has pledged to shrink. The Fed's balance currently stands at $6.7 trillion, and how exactly it plans to reduce it remains unclear. That task could be difficult because balance sheet contraction risks removing much-needed liquidity from short-term interbank markets.

In any case, Warsh's statements and answers are likely to move FX markets today.

EUR/USD

Buyers should be thinking about taking the 1.1790 level. Only then can they target a test of 1.1822. From there, a move to 1.1850 is possible, though doing so without support from large players would be difficult. The farther target is 1.1890. On a decline, I expect significant buying interest only around 1.1760. If no one shows up there, it would be prudent to wait for a new low at 1.1730 or to open long positions from 1.1705.

GBP/USD

Pound buyers need to take the nearest resistance at 1.3540. Only that will open a path to 1.3565, above which a breakout will be difficult. The farther target is the 1.3595 area. On a drop, bears will try to seize control at 1.3505. If they succeed, a break of the range would deal a serious blow to bulls and push GBP/USD down toward 1.3477 with a prospect of reaching 1.3450.