All Roads Lead to Jerome Powell: Fed Hints at Rate Cuts as Economic Priorities Shift

Economic

Summary:

A single statement from Fed Chair Jerome Powell suggesting a shift toward supporting employment over inflation control sent U.S. markets soaring. As geopolitical tensions and tariffs threaten economic stability...

Powell’s Subtle Signal Sparks Market Frenzy as Fed Shifts Focus

At the Jackson Hole Economic Symposium, Federal Reserve Chair Jerome Powell delivered a message that rocked markets: the Federal Reserve may soon pivot from its inflation-fighting stance to supporting a softening labor market. In doing so, Powell once again reminded the world why all economic roads still lead to him.

Since inflation hit a 40-year high of 9.1% in June 2022, the Fed has focused on raising interest rates to curb price growth. For months, the central bank appeared to be steering the U.S. economy toward a “soft landing” cooling inflation without triggering a recession. However, rising tariffs, global economic uncertainty, and weakening employment data are beginning to tarnish that achievement.

Powell acknowledged that the risks between inflation and unemployment are “shifting,” suggesting that the Fed might need to “adjust its policy stance.” This remark was interpreted by markets as a soft indication of potential rate cuts, possibly as early as September.

Markets React Swiftly to Powell’s Subtle Pivot

Financial markets wasted no time responding. The Dow Jones Industrial Average surged by over 846 points, the S&P 500 rose 1.52%, and Treasury yields fell clear signals that investors now expect a looser monetary policy ahead. The rally underscores the enormous influence the Fed and Powell personally continues to wield over the global financial system. As CNBC wryly put it, “All roads lead to Jerome.”

Powell’s remarks come as the U.S. labor market begins to show signs of fatigue after years of resilience. A potential pivot toward employment protection signals that the Fed is watching not just the consumer price index but also the real economy’s human impact particularly as political and trade tensions heat up.

Policy Uncertainty Amid Political and Economic Shocks

Complicating matters further are recent political and economic developments that introduce volatility into the Fed’s finely balanced equation. President Donald Trump announced that furniture imports would face new tariffs later this year, part of his broader goal to repatriate U.S. manufacturing jobs. The White House also made a surprise move by purchasing a 10% stake in Intel amounting to $8.9 billion highlighting Washington’s increasingly hands-on role in shaping domestic industrial policy.

Meanwhile, Canada dropped several retaliatory tariffs against the U.S., though those on cars and steel remain in place, keeping trade tensions alive. These shifting dynamics create new challenges for monetary policy, as central banks must now navigate not only inflation and employment but also the consequences of political and economic nationalism.

Eyes on Nvidia and Inflation Data This Week

As August draws to a close, market sentiment remains sensitive to both economic data and corporate earnings. Tech giant Nvidia is set to report earnings mid-week, while Friday will bring the release of the Personal Consumption Expenditures (PCE) price index a key inflation gauge watched by the Fed. A hot PCE reading could muddy Powell’s soft-landing narrative, while a cooler figure may give the Fed further cover to initiate rate cuts.Outside the financial world, U.S. corporations are also facing their own storms. American Eagle’s denim campaign featuring actress Sydney Sweeney drew backlash for a controversial play on the words “jeans” and “genes,” which some critics said echoed eugenics-era rhetoric. This misstep is just the latest in a string of brand blunders in 2025, with marketing experts noting that many companies are still applying outdated corporate thinking to today’s culturally complex environment.

Jerome Powell remains the eye of the economic storm his words dissected by investors, his independence questioned by political forces, and his policy decisions carrying global consequences. As the balance between inflation and unemployment shifts, and geopolitical forces mount, Powell’s next move could chart not just the U.S. economy’s direction, but set the tone for global central banking in the months ahead.

Source: CNBC

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Economic

Trump’s Pressure on the Fed Sparks Global Alarm Over Central Bank Independence

At the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, central bankers from around the world voiced growing concern over what they perceive as an existential threat to monetary policy independence. The political firestorm surrounding the U.S. Federal Reserve driven by President Donald Trump’s relentless pressure to cut interest rates and his public campaign to replace Fed Chair Jerome Powell has created ripples far beyond American borders.

The concern isn't just about one central bank. As Trump pushes to force out not only Powell but also Governor Lisa Cook, global central bankers worry that if the Fed yields to such political demands, a dangerous precedent will be set. That could embolden leaders in other countries particularly those with populist leanings to manipulate their own central banks for short-term political gain.

Olli Rehn, a European Central Bank (ECB) policymaker from Finland, warned that these U.S. developments have a “spiritual spillover” effect in Europe. If the world’s most influential central bank falls to political pressure, it may weaken the global framework that has long upheld central bank independence as a cornerstone of macroeconomic stability.

Independence Is “Not to Be Taken for Granted”

Since former Fed Chair Paul Volcker’s battle against inflation in the 1980s, the Fed has served as the model for modern central banking: politically insulated, inflation-focused, and guided by long-term stability over short-term political cycles. ECB Governing Council member and Bundesbank President Joachim Nagel reminded attendees that “independence is the conditio sine qua non for price stability,” emphasizing that institutions must defend this principle vigorously.

Central banks worldwide now fear that once that model is compromised in the U.S., institutional norms in countries with weaker legal protections could crumble faster. These concerns come amid real-world examples of political interference, from Japan's strategic reshuffling of the Bank of Japan leadership under Prime Minister Shinzo Abe to prolonged political gridlock in countries like Slovenia and Latvia over central bank appointments.

Financial Market Calm Masks Institutional Risk

Despite these warnings, markets have remained relatively calm. U.S. equities are buoyant, and Treasury yields have not yet shown signs of alarm over institutional risk. However, many central bankers see this as a potentially misleading signal. If investors begin to perceive that the Fed is no longer acting independently, it could prompt a sharp repricing of risk leading to higher yields, weakened demand for U.S. Treasuries, and volatility in foreign exchange markets.

Some central banks have already begun cautioning domestic lenders about overexposure to the U.S. dollar, anticipating possible shocks if institutional credibility erodes. Should confidence in U.S. monetary governance break down, it could affect the dollar’s status as the world’s reserve currency and unravel decades of trust in global financial structures.

A “Bad Example” for the World

Maury Obstfeld, former IMF chief economist and now a senior fellow at the Peterson Institute, summed up the broader implications starkly. “Taking over the Fed is one development that would set a very bad example for other governments,” he said. The danger is not just institutional degradation in the U.S., but the cascading effect it may unleash across fragile democracies or authoritarian regimes, where the temptation to politicize monetary policy is already high.

Trump’s comments that Powell’s term “cannot end fast enough” and his very public search for a successor have drawn comparisons to Japan’s Abe-era central bank overhaul only now replicated in a country long considered a bastion of legal and institutional integrity.

The Global Stakes: Credibility, Inflation, and Stability

Ultimately, what’s at stake is the credibility of global monetary governance. Should the Fed fall under overt political control, the risks extend far beyond Washington: from Europe’s inflation battles to Asia’s financial market stability. The fear among Jackson Hole attendees is that if political capture can happen in the United States, nowhere is safe.

The world’s central bankers left Wyoming this weekend united not just in monetary concerns, but in a deeper institutional anxiety hoping that the Fed will hold its ground, because if it doesn’t, the shockwaves may reach every corner of the global economy.

Source: Reuters

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Economic

Bond

PBOC Reinforces Liquidity to Curb Bond Selloff and Support Growth

Amid mounting pressure on sovereign bonds and a flailing economy, the People’s Bank of China (PBOC) has significantly ramped up its long-term liquidity support this month. In total, a net 600 billion yuan ($84 billion) was added through a combination of one-year medium-term lending facility (MLF) operations and three- to six-month outright reverse repos marking the largest injection since January, according to Bloomberg’s calculations.

The move sent immediate ripples across financial markets. China’s overnight repo rate dropped by seven basis points to 1.35%, reflecting easier liquidity, while 30-year bond futures rose as much as 0.7%, their strongest gain in over four months. These developments underscore the central bank’s growing concern over market instability and investor anxiety around longer-dated bonds.

Stabilizing the Bond Market and Funding Conditions

The PBOC’s increased use of MLF and reverse repos aims to ease redemption pressure on bond funds, maintain healthy funding conditions, and facilitate government bond issuance. The signal is clear: while Beijing remains reluctant to implement broader stimulus tools like benchmark rate cuts or reserve ratio reductions, it is willing to fine-tune liquidity conditions to prevent financial stress.

Investor appetite for long-term government bonds has waned, particularly after the most recent 30-year debt auction saw the highest yields since December. The government’s recent imposition of a tax on interest income from bonds has further suppressed demand, adding to volatility in the fixed-income market. The central bank’s liquidity response appears designed to preemptively counteract this aversion by stabilizing yields and supporting investor confidence.

Avoiding Aggressive Easing For Now

While some analysts had expected a more aggressive easing cycle in the face of weak inflation and slowing economic data, the PBOC has so far resisted such moves. Beijing’s reluctance stems from a desire to avoid fueling asset bubbles especially as stocks continue to climb and concerns over long-term financial risk. In place of blanket rate cuts or quantitative easing, the PBOC is choosing precision-targeted liquidity boosts that provide breathing room to key sectors without adding undue systemic risk.

Wang Qing, chief macro analyst at Golden Credit Rating Co., emphasized that these injections reflect a “growth-supportive monetary policy stance,” particularly one that avoids destabilizing extremes. He also noted the importance of sustaining liquidity to backstop rising bank lending and ensure the smooth rollout of additional government borrowing.

Risks of Liquidity Drain from Stock Rally

Another concern is the recent surge in equity markets, which has begun drawing funds out of household savings accounts and into riskier assets. This dynamic could strain liquidity in the banking system if left unchecked, especially as demand for credit remains soft and investment momentum continues to falter.

By reinforcing cash conditions now, the PBOC is attempting to preempt financial strain, particularly in the shadow banking system or among smaller banks that might struggle with liquidity outflows. With the stock market still attracting investor attention despite macroeconomic softness, there is a real risk that volatility in bonds or credit could trigger a broader sentiment reversal.

Short-Term Relief, Long-Term Balancing Act

While the current liquidity push offers short-term relief to the bond market and a supportive backdrop for loan growth, the broader economic picture remains fragile. Beijing’s strategy reflects a balancing act supporting growth and market stability without reigniting debt-fueled overheating.

Looking forward, traders and economists will watch for signs of whether the PBOC intensifies its interventions or shifts toward more overt policy easing should deflationary pressures or credit stress deepen. For now, China appears to be walking a middle path resisting blunt tools while tactically using its liquidity arsenal to preserve financial stability.

Source: Bloomberg

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IC Markets

Forex

Political

Economic

It was an interesting trading week for financial markets last week, with the major update coming in the final session as Fed Chair Jerome Powell all but confirmed a September rate cut in his speech from Jackson Hole.Markets closed the week in a positive fashion on Friday, and most investors are expecting that momentum to carry into the early sessions of this week.It is a relatively quiet week on the macroeconomic calendar; however, there are a few key updates that should see some volatility around them, culminating in the Fed’s favoured inflation indicator on Friday.

Here is our usual day-by-day breakdown of the major risk events this week:

It could be an interesting start to the week for financial markets as key central bank heavy hitters are still in Jackson Hole for the symposium over the weekend, and we could see some sharp moves on the open in Asia, especially in currency markets. Kiwi markets will then be in focus early in the day with the latest Retail Sales numbers due out. Liquidity will be lower than usual in the European session with the UK on holiday, and we could see some moves in the euro with the German IFO Business Climate data due out. The New York session is relatively light on data updates, with just the New Home Sales data due out.

The first two sessions of the day on Tuesday are light in terms of calendar events; however, things should heat up once New York opens. US Durable Goods data is due out early in the day, and this is followed a couple of hours later by the CB Consumer Confidence numbers and the Richmond Manufacturing Index data. The focus will move to Canadian markets later in the session with Bank of Canada Governor Tiff Macklem due to speak.

Australian markets will be in focus for traders in the Asian session with key CPI data due out early in the day. There is very little on the calendar in the latter two sessions; however, the weekly US Crude Oil Inventory numbers are due out in the New York session, and we do hear from the Fed’s Thomas Barkin later in the day.

There is nothing of note on the calendar in the Asian session on Thursday, but the focus will be on Swiss markets early in the London session with the quarterly GDP numbers due out. The New York session again looks likely to be the busiest, with US quarterly Prelim GDP data due out alongside the weekly Unemployment Claims numbers early in the day. Pending Home Sales data is due out later, and we also hear from the FOMC’s Christopher Waller just after the close.

Inflation numbers are in focus across the sessions on Friday. The focus in the Asian day will be on Japanese markets with the key Tokyo CPI numbers due out. The London session sees Prelim CPI data out from Germany, France, Italy, and Spain. However, the main event of the day—and probably the week—is once again scheduled for the final session. The US Core PCE Price Index data is due out early in the session, and traders will be looking for this to confirm a September rate cut. Canadian GDP numbers are out at the same time, and we have revised University of Michigan data later in the session, but expect the PCE numbers to dominate sentiment into the weekend.

Source: IC Markets

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ING

Economic

Commodity

Forex

Political

Russia-Ukraine Conflict

Energy – India’s secondary tariffs come into effect this week

Oil prices managed to finish last week higher, settling up almost 2.9% higher as enthusiasm over a potential Russia-Ukraine ceasefire wanes. Uncertainty prevails as US President Trump once again threatens to impose tougher sanctions on Russia unless there’s a deal to end the war. Trump said there needs to be more clarity within roughly two weeks. However, the market may be reluctant to read too much into this latest threat, given the lack of action taken by the US administration against Russia following the Trump-Putin summit.

In the near term, we may see the oil market benefit following Fed Chair Jerome Powell’s Jackson Hole speech, which was largely dovish and provided a boost to most risk assets. The market is pricing in more than an 85% probability that the Fed cuts interest rates by 25bp in September, up from around 72% ahead of Powell’s speech.

It's looking increasingly likely that secondary tariffs against India for their purchases of Russian oil will go ahead on 27 August. There appears to be little progress in trade talks between India and the US, since the US announced the tariff earlier in the month. Furthermore, Indian refiners have been showing increased interest in Russian oil, after state refiners initially paused purchases until there is clarity from the government. If India continues to buy Russian oil despite the 25% secondary tariff, it does little to change the market outlook. Instead, it only confirms the bearish outlook for oil prices.

Speculators continue to reduce their net long in ICE Brent amid a bearish outlook. Speculators sold 23,852 lots over the last reporting week to leave them with a net long of 182,695 lots as of last Tuesday. The move was driven predominantly by longs liquidating. Meanwhile, speculators also sold 19,578 lots in NYMEX WTI, leaving them with a net long of 29,686 lots. This is the smallest position held in WTI since October 2008.

Fading optimism over a Russia-Ukraine peace is providing support for European gas prices. At the same time, concerns over flows to Europe amid upcoming Norwegian maintenance will also provide support to the market. Front-month Title Transfer Facility (TTF) futures managed to settle more than 8% higher over the week. EU gas storage is close to 76% full, below the 91% seen at the same stage last year and lower than the 83% 5-year average.

US natural gas has been more bearish, with Henry Hub down 7.5% over the last week and settling at its lowest level since October 2024. This is despite last week’s storage build coming in below average. However, overall storage remains 5.8% above the 5-year average, while we are moving towards a period where we expect to see reduced cooling demand. This is allowing for larger storage builds ahead of the 2025/2026 winter.

Metals – Gold jumps as Powell signals rate cuts

Gold jumped last Friday as the dollar and bond yields fell after Federal Reserve Chair Jerome Powell suggested an interest rate cut in September, pointing to increasing labour market risks despite persistent inflation concerns. Traders added to bets the Fed will cut rates next month. With US rate cut bets intensifying after Powell’s speech, gold could be poised for another fresh record high.

World Steel Association data shows that global steel production fell 1.3% year on year to 150.1mt in July, as lower output in China, Japan, Russia, and Germany offset higher output from India and the US. Cumulative global steel output fell 1.9% YoY to 1,086.2mt over the first seven months of the year. Chinese steel production fell 4% YoY for a second straight month to 79.7mt last month amid government efforts to gain control over supply. Over the first seven months of the year, output fell 3.1% YoY to 594.5mt. In the EU, crude steel production dropped 7% YoY to 10.2mt with Germany (-13.7% YoY) dominating the declines.

Source: ING

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Winkelmann

Commodity

Cryptocurrency

Forex

Stocks

Markets were quiet for most of last week as traders waited for Fed Chair Jerome Powell’s speech at Jackson Hole. Until Friday, the U.S. dollar traded sideways and stocks moved lower as investors wanted to hear if the Fed would confirm a rate cut in September. Economic data before the speech was mostly better than expected, with stronger PMI figures in the U.S., U.K., and Eurozone, higher U.K. CPI, and U.S. home sales beating forecasts. Japan’s core inflation slipped to 3.1% in July, just above expectations, while Canada’s removal of retaliatory tariffs was seen as positive for global trade.

On Friday, Powell hinted the Fed may cut rates next month, saying both labor demand and supply are slowing. He stressed that while tariffs are lifting prices, these effects are likely temporary. His tone was more dovish, and markets reacted strongly—equities surged with the Dow hitting a record high, and the U.S. dollar weakened as the chance of a September rate cut rose to about 90%.

Powell also emphasized that the Fed remains data-driven and independent despite political pressures. With job growth slowing and unemployment risks rising, markets are now waiting for this week’s labor and inflation data to confirm whether the Fed will move at the September meeting.

Markets This Week

U.S. Stocks

The Dow hit new record highs last week after Fed Chair Powell’s Jackson Hole speech, with a September rate cut now seen as highly likely. With the negative impact of U.S. tariffs proving less severe than expected, U.S. stocks remain in a strong upward trend. However, the Dow is currently looking overbought, so a pullback or sideways move is likely at the start of the week, which could provide a buying opportunity for both short- and long-term traders. Key resistance levels are at 46,000 and 47,000, while support is seen at 45,000, 44,000, and 43,000.

Japanese Stocks

After hitting a record high early last week, the Nikkei faced profit-taking ahead of Powell’s speech but later found support at previous highs and closed strongly, following the surge in U.S. equities. The index has risen sharply over the past month and has now moved back below the 10-day moving average, suggesting sideways trading in the short term as investors look ahead to when the Bank of Japan may raise interest rates. Key resistance levels are at 44,000円 and 45,000円, while support is seen at 42,250円, 42,000円, 41,500円, and 41,000円.

USD/JPY

The USD/JPY traded sideways for most of last week ahead of the Jackson Hole meetings, before falling sharply after Powell’s speech, as a September U.S. rate cut now looks highly likely. The pair remains in a range, with the 10-day moving average also pointing sideways, making range trading the preferred strategy. However, risks lean to the downside if the Bank of Japan signals it is close to raising interest rates or if upcoming U.S. data disappoints. Resistance is at 148, 149, and 150, while support is at 146 and 145.

Gold

Gold initially tested lower last week but recovered strongly as expectations of a U.S. interest rate cut in September supported demand. The market has moved back above the 10-day moving average, breaking the recent downtrend. Overall, gold remains range-bound, but with support holding, the market could continue to test higher levels, making buying on weakness the preferred strategy. Resistance is at $3,400 and $3,450, while support is at $3,300, $3,250, and $3,200.

Crude Oil

Crude oil rebounded in a quiet week, breaking the recent downtrend after closing above the 10-day moving average. Buyers returned as talks to end the Russia–Ukraine war showed little progress, while Powell’s comments on future rate cuts were seen as supportive for demand. With the downtrend now broken, prices are expected to trade sideways in the short term as traders wait for further news from the negotiations. Resistance is seen at $65, $70, and $75, while support is at $60 and $55.

Bitcoin

Further selling continued through most of last week after the negative key reversal signal on the daily chart, but the market found strong support at $112,000, the August lows and previous record highs. Powell’s speech was positive for Bitcoin, as lower interest rates make the asset more attractive, though Bitcoin remains in a short-term downtrend. For now, the market is likely to trade sideways, offering range-trading opportunities between $112,000 and $120,000 this week. Resistance is at $120,000, $125,000, and $150,000, while support is at $112,000, $110,000, and $105,000.

This Week’s Focus

● Monday: U.S New Home Sales

● Tuesday: Australia Reserve Bank Minutes, U.S. Durable Goods Orders, U.S. CB Consumer Confidence

● Thursday: U.S. GDP, U.S. Initial Jobless Claims, U.S. Pending Home Sales

● Friday: Japan Tokyo Core CPI, Japan Industrial Production, U.S. Core PCE Price Index, U.S. Chicago PMI, U.S. Michigan Consumer Sentiment

This week, traders are still reacting to Fed Chair Powell’s speech at Jackson Hole. His dovish comments raised hopes for a September rate cut, but the question now is whether the dollar will keep falling or if the cut is already fully priced in, leading to a rebound. Powell stressed that the Fed is data-driven, so important U.S. reports on durable goods, GDP, inflation, and consumer confidence will be key. These numbers could quickly change market expectations and create new trading opportunities.

Geopolitics may also play a role. A possible breakthrough in Russia–Ukraine peace talks, though unlikely, would likely lift equities but push oil lower. At the same time, traders are watching the Bank of England for signs of another rate cut, and Japan for a possible rate hike after strong GDP. With central bank signals and global risks in focus, volatility is likely to stay high across currencies, stocks, and commodities.

Source: ACTIONFOREX

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Economic

Forex

Dollar Reels After Powell’s Dovish Turn at Jackson Hole

The U.S. dollar stumbled out of the weekend, struggling to regain ground after Federal Reserve Chair Jerome Powell’s speech at Jackson Hole opened the door to a possible rate cut as early as September. His remarks highlighting “downside risks to employment” and the potential need for a swift policy response sent the greenback sharply lower on Friday, with the euro climbing more than 1% to its strongest level since July 28.

On Monday, the dollar attempted a modest rebound, ticking up 0.2% against the euro to $1.1699 and 0.1% against the pound to $1.3502. However, it remained well below recent highs. Against the yen, the dollar regained 0.4% to 147.46, after shedding 1% in the previous session. Meanwhile, the Australian dollar briefly spiked to a one-week high of $0.6523 before retreating to $0.6484.

Markets Recalibrate on Rate Cut Bets, Eye September

Powell’s shift in tone reinforced market expectations that the Fed may ease policy soon. According to LSEG data, traders are now pricing in an 80% chance of a 25-basis-point cut at the upcoming September 17 meeting, with nearly 50 basis points of total easing expected by the end of 2025. This repricing follows volatile weeks where optimism about a resilient labor market and sticky inflation had previously suppressed dovish sentiment.

The September pivot speculation began after a weak payroll report earlier this month, but was later tempered by stronger-than-expected producer prices and business activity readings. Powell’s latest remarks broke that deadlock, signaling a willingness to prioritize labor market risks over inflation stubbornness.

As Goldman Sachs analysts noted in a client briefing, “Powell’s message met the market’s bar for dovishness. But now, the baton passes back to the data.” The release of the Fed’s preferred inflation metric the PCE deflator on Friday and August’s nonfarm payrolls the following week will be critical in shaping the September outcome.

Trump’s Political Attacks Cloud Central Bank Independence

In the background, political pressure on the Federal Reserve is intensifying, adding another layer of uncertainty to the dollar’s trajectory. Former President Donald Trump has renewed public attacks on Powell and Fed officials, questioning their independence and threatening direct action.

Last week, Trump targeted Fed Governor Lisa Cook over personal mortgage holdings, stating he would fire her if she doesn’t resign. He has also criticized Powell for not cutting rates in 2025 and for “wasting money” on the Federal Reserve building’s renovation. These comments have raised investor concerns over potential interference in Fed policy should Trump return to office, weakening the perceived institutional strength of the U.S. central bank.

Rate Cuts Could Weigh Heavily on USD

While Powell’s tone shift may support equity markets in the short term, the dollar faces medium-term headwinds. A lower interest rate environment will likely erode yield appeal versus peers, especially as the ECB and BoJ remain cautious. Moreover, lingering doubts over central bank autonomy amid political pressure threaten the dollar’s credibility as a global reserve currency.

The dollar's technical rebound may be shallow unless data surprises to the upside. Traders should monitor PCE and payrolls closely. A confirmed dovish turn could see EUR/USD retest $1.18–$1.19, while USD/JPY may soften toward 145. Risk-on currencies like the AUD could outperform if global equities remain buoyant. Long-term, consider hedging dollar exposure, particularly in multi-asset or emerging market portfolios.

The greenback’s slide, fueled by both policy recalibration and political intrusion, underscores a fragile moment for the U.S. currency. As Fed independence and inflation credibility come under renewed scrutiny, markets now brace for a September decision that may reshape the global FX landscape.