Morgan Stanley is warning that Kevin Warsh’s first policy meeting as Federal Reserve Chair could send shockwaves through foreign-exchange markets. The investment bank flagged June 17, the date of Warsh’s inaugural FOMC meeting, as a potential flashpoint for disruption in carry trades, the popular strategy where investors borrow in low-yielding currencies to park money in higher-yielding ones.
A new sheriff with a familiar resume
Warsh is no stranger to the Fed. He served as a Federal Reserve governor from 2006 to 2011, a stretch that included navigating the worst financial crisis since the Great Depression. Before that, he was a Morgan Stanley executive. President Trump nominated him on February 2, 2026, and the Senate confirmed him in mid-May, largely along partisan lines.
He was sworn in on May 22, 2026, replacing Jerome Powell in what markets have been pricing as a meaningful philosophical shift at the top of the central bank.
Morgan Stanley’s concern centers on the fact that carry trades have flourished in recent low-volatility environments. Positions funded by the Japanese yen and Swiss franc are particularly exposed. Any tightening signal, or even a shift in how the Fed communicates its intentions, could trigger rapid unwinding of leveraged FX positions.
