Fed has 66.3% probability of holding rates steady in July

Summary

As of July 1, 2026, CME FedWatch data shows a 66.3% probability of the Fed holding rates steady in July, with a 33.7% chance of a 25bps hike Golden Finance. However, trader sentiment is shifting rapidly, with short positions in Fed Funds futures surging 30% since new Chair Kevin Warsh took office, driven by strong labor data and hawkish comments from Cleveland Fed President Hammack Sina Finance+ 3.

Impact Analysis

The market is finally waking up to the ‘Warsh era’ hawkishness. While the 66.3% probability of a July hold looks like the headline, the real signal is the 33.7% chance of a hike that was essentially priced at zero just weeks ago Golden Finance+ 2. We’re seeing a massive regime shift in positioning—open interest in Fed Funds futures has surged 30% since Kevin Warsh took the chair, heavily dominated by shorts Sina Finance+ 2.

This isn’t just speculative noise; it’s backed by officials like Hammack, who is explicitly opening the door for a hike due to core service inflation and AI-driven investment pressures Yahoo Asia. The 2-year high in JOLTS job openings provides the fundamental fuel for this hawkish fire AnueSec.

Bottom line: The market is still underpricing the ‘higher for longer’—or even ‘higher again’—risk. Gold is already feeling the squeeze, hitting 7-month lows FX678. I’d stay short duration and long USD here; the consensus for a pause is far more fragile than the 66% headline suggests.