Federal Reserve’s Kevin Warsh could disrupt FX markets at first policy meeting, Morgan Stanley warns

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.

The crypto wildcard

Warsh’s confirmation process surfaced a detail that caught the attention of digital asset markets: he disclosed personal investments in more than 30 cryptocurrency projects, including Solana and a spot Bitcoin ETF.

Warsh has described Bitcoin as an important asset for policymaking and stated it does not make him nervous. At the same time, he’s been careful to label certain cryptocurrency projects as potentially fraudulent, suggesting his approach won’t be a blanket endorsement of the sector.

What this means for investors

The most immediate risk sits squarely in the FX market. Carry trades work until they don’t, and the transition between those two states tends to be violent rather than gradual. Traders holding leveraged positions in yen-funded or Swiss franc-funded trades should be paying close attention to any pre-meeting signals from Warsh or other FOMC members in the days leading up to June 17.

A hawkish Fed tends to drain liquidity from risk assets. Bitcoin and the broader crypto market have historically been sensitive to tightening cycles. If Warsh’s first meeting signals a more restrictive monetary policy stance, the near-term effect on crypto could be negative even as the longer-term regulatory outlook improves.

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