Insights 
VT 
What began as a carefully measured address in the Wyoming mountains rippled instantly across global markets. Jerome Powell’s cautious tone, paired with a nod toward easing, pushed Wall Street to record highs and re-shaped currency flows within hours.
Federal Reserve Chair Jerome Powell’s appearance at Jackson Hole carried more weight than the setting alone. His message of caution, coupled with the hint of a softer policy path, pushed Wall Street to fresh highs and shifted expectations across currencies and commodities.
Traders are now positioning for a September rate cut with conviction, and the ripples of this outlook are visible in every corner of the market.
The context Powell painted was complex. Job creation has slowed to just 35,000 per month compared with 168,000 last year, and unemployment ticked up to 4.2% in July.
Inflation, however, remains sticky, with core PCE climbing 2.9% year-on-year in July, fuelled in part by tariffs.
The chair suggested tariffs would act as a one-time price shock rather than a persistent inflation driver, giving the central bank room to ease if labour pressures worsen.
Markets’ Euphoria Takes Hold
Markets interpreted this as a green light to anticipate cuts. Futures markets pushed the probability of a September rate reduction to 80–85% from 70–75% earlier in the day, with expectations for two quarter-point cuts by year-end.
The immediate response was emphatic. The S&P 500 jumped 1.3% by late morning and closed 1.47% higher near record levels, while the Dow Jones Industrial Average climbed almost 1.9% to a record close.
Small-cap equities surged nearly 4%, reflecting a market eager for dovish signals. For the moment, the rally has broadened beyond mega-cap technology, with cyclicals such as financials and industrials seeing inflows.
If upcoming ISM manufacturing data improves under the prospect of lower borrowing costs, these sectors may gain further momentum.
Still, the spectre of stagflation lingers if inflation fails to ease while growth slows, limiting the Fed’s room to manoeuvre.
Key Movements of the Week
The trading week after Jerome Powell’s Jackson Hole speech was dominated by price action that reflected a sharp turn in sentiment.
In currency markets, the dollar index slipped after initially spiking to 98.70, falling toward 97.35 with eyes on 97.10 as the next support.
The euro climbed toward 1.1755 and could extend to 1.17883 if consolidation holds. Sterling advanced from the 1.3370 monitored area, and traders now watch 1.3605 and 1.3625 should momentum break past 1.35943.
The yen strengthened as USDJPY fell after breaching 148.513, with a test of 146.208 likely if downside pressure continues.
The Swiss franc gained, dragging USDCHF down from 0.8110 toward 0.7960. Commodity currencies reacted strongly, with AUDUSD pushing higher toward 0.6515, NZDUSD eyeing 0.5890–0.5915, and USDCAD sliding to the 1.3810–1.3790 zone.
Commodities reflected the dovish tilt as well.
Gold advanced after Powell’s announcement, and traders now eye consolidation at the 3350 area.
Oil may be preparing for consolidation too, with potential resistance at 66.45 and support down at 61.15 if selling resumes. Natural gas extended losses toward 2.55, where bullish price action may re-emerge.
Bitcoin surged from 111,200 to the monitored 117,700 area after Powell’s speech. A period of consolidation here could see the cryptocurrency break higher, but failure to hold may drive it toward 108,900.
The SP500 already cleared 6445 and could now target 6630 or 6730, reflecting investor confidence in easier policy.
The broader picture is clear: Powell has tilted the Fed toward accommodation, and markets are pricing it in aggressively. Yet the balance remains fragile.
Employment risks loom and inflation has not subsided, making September’s data pivotal. The market may cheer lower rates, but sustainability will depend on whether growth holds steady under this policy shift.
Key Events This Week
The calendar is sparse at the start of the week, but builds into a string of pivotal data releases that could set the tone for markets following Powell’s Jackson Hole speech.
On Wednesday, 27 August attention shifts to Canada and Australia. The Bank of Canada’s Governor Macklem is due to speak as inflation concerns swirl. July’s consumer prices cooled, but uncertainty remains on whether the central bank will cut rates in September.
Meanwhile, Australian CPI is forecast at 2.30% year-on-year, compared with 1.90% previously. If the data continues to climb, AUDUSD could extend higher.
Thursday, 28 August brings the US preliminary GDP figures. Growth is expected at 3.10% quarter-on-quarter, up from 3.00% previously. The rebound follows a contraction in the first quarter, with consumer spending and government outlays expected to be the primary drivers.
A stronger reading would be positive for the dollar, though its impact will depend on how traders interpret the balance between firm growth and Powell’s dovish tone.
Friday, 29 August rounds out the week with inflation data from Japan and the United States. Tokyo core CPI is forecast at 2.60% year-on-year versus 2.90% previously, suggesting price pressures are easing.
A softer print may give the Bank of Japan reason to delay a rate hike. The US releases its Core PCE Price Index, the Fed’s preferred inflation gauge, with expectations of 0.30% month-on-month, identical to the previous reading.
Any deviation from this could test the credibility of Powell’s claim that tariff-driven inflation is temporary.
Looking ahead, the following week holds even weightier releases: ISM manufacturing PMI on 2 September, Australia’s GDP and US JOLTS job openings on 3 September, ISM services PMI on 4 September, and the nonfarm payrolls and unemployment rate on 5 September.
