Global Markets Brace for Powell at Jackson Hole Symposium

The EUR/USD retreated 0.34% on Thursday, with the US Dollar posting solid gains following the release of key economic data. Strong figures on business activity offset a softer-than-expected jobs report, prompting traders to scale back expectations for a Federal Reserve rate cut at the September meeting.

Market sentiment turned cautious as investors await a speech from Fed Chair Jerome Powell. S&P Global’s August Purchasing Managers Index (PMI) surveys revealed that activity in both the US manufacturing and services sectors picked up, providing support for the Dollar.

Meanwhile, labor market data indicated signs of cooling, with weekly new claims for unemployment benefits rising to the highest level in three months.

The European Central Bank (ECB) is expected to keep interest rates unchanged at its next meeting, while the Fed, though trimming the odds of an imminent rate cut, is still anticipated to continue its easing cycle in the coming months.

However, some regional Fed officials—including Cleveland’s Beth Hammack, Kansas City’s Jeffrey Schmid, and Atlanta’s Raphael Bostic—have recently taken a hawkish stance, emphasizing that inflation risks remain a priority over the employment mandate.

All eyes will now be on Powell’s Friday speech. A dovish tone could lift the EUR/USD, narrowing the interest rate gap between the US and the Eurozone.

Gold prices edged lower on Thursday as the US Dollar strengthened, with investors closely watching Federal Reserve Chair Jerome Powell’s upcoming speech at the Jackson Hole symposium for indications on the central bank’s policy trajectory. The greenback’s strength weighed on gold, making the metal more expensive for overseas buyers.

Gold, which does not yield interest, generally performs well in a low-rate environment. The Fed has kept interest rates unchanged since December, but traders now see a 71% probability of a quarter-point rate cut by September, according to CME’s FedWatch tool. Market participants are eager for guidance on whether the Fed will signal further easing later in the year, which could provide additional support for the precious metal.

Economic data added to the market’s cautious tone. Weekly US jobless claims rose to their highest level in nearly three months, suggesting a modest cooling in the labor market. At the same time, Bloomberg News reported that the US Justice Department intends to investigate Fed Governor Lisa Cook over mortgage fraud allegations, with a senior official reportedly urging Powell to remove her from the board. While these developments do not directly affect gold, they contribute to broader market uncertainty and could influence investor sentiment heading into Powell’s remarks.

Oil prices rose by nearly a dollar a barrel on Thursday as geopolitical tensions between Russia and Ukraine intensified and as US data signaled robust demand in the world’s largest oil-consuming nation.

The stalled peace process in Ukraine kept oil traders cautious after a recent selloff fueled by hopes that US-led diplomacy would bring an end to Russia’s war. Moscow and Kyiv have since traded blame over the deadlock. On Thursday, Russia launched a major air attack near Ukraine’s EU border, while Ukraine claimed to have struck a Russian oil refinery.

Oil prices were further supported by a larger-than-expected drawdown in US crude inventories. The US Energy Information Administration (EIA) reported a 6 million-barrel decline in stockpiles for the week ending August 15, significantly exceeding analyst expectations of a 1.8 million-barrel draw. This points to sustained demand in the US, bolstering prices despite longer-term oversupply concerns.

Investors are also closely watching the Jackson Hole economic conference in Wyoming for clues on the Fed’s next move, including a potential interest rate cut. The annual gathering of central bankers began Thursday, with Fed Chair Jerome Powell scheduled to speak on Friday.

The US 500 fell for a fifth consecutive day on Thursday, weighed down by declines in retail and technology stocks and lingering economic concerns, ahead of remarks from Federal Reserve Chair Jerome Powell.

Walmart led losses in the retail sector after reporting mixed second-quarter results, with revenue beating expectations but earnings falling short of analyst estimates. The company did, however, raise its full-year sales and earnings outlook, signaling confidence in its long-term growth despite near-term challenges.

Walmart’s low-price model and grocery dominance have helped it outperform many peers, surpassing earnings estimates for 11 consecutive quarters, according to LSEG data. Other major retailers also faced pressure this week: Home Depot reported results on Tuesday, while Target slid on Wednesday after naming insider Michael Fiddelke as CEO and maintaining its previously lowered annual forecasts.

Technology stocks continued to face selling pressure amid growing skepticism over artificial intelligence (AI) profitability.

Investors are closely watching AI bellwether Nvidia, whose quarterly earnings are due next week and may provide further insights into the industry’s growth prospects.

Fed Chair Jerome Powell is scheduled to speak at the Jackson Hole Symposium on Friday, with investors eagerly awaiting any signals on the Fed’s policy direction.