Investor expectations for U.S. interest rate cuts have gained traction in recent sessions, fueled by dovish undertones in the latest Federal Reserve minutes. Several Fed officials acknowledged the potential need for rate reductions, stoking speculation ahead of the pivotal Jackson Hole symposium. However, market participants are approaching the event with caution, wary that Fed Chair Jerome Powell might temper expectations, limiting risk-taking and keeping the U.S. dollar in a holding pattern as it seeks stability after a recent selloff.
Adding to the rate-cut narrative, a significant downward revision to U.S. job growth has bolstered traders’ conviction. The Bureau of Labor Statistics’ preliminary benchmark revision suggests that payrolls were overestimated by 818,000 workers for the 12 months through March, equating to a monthly shortfall of around 68,000 jobs. This represents the largest downward adjustment since 2009, further supporting the case for a potential rate cut in September.
In the global arena, all eyes are on Bank of Japan (BOJ) Governor Kazuo Ueda, who will be under intense scrutiny during his address to lawmakers on Friday. The BOJ’s recent hawkish signals have already contributed to market turbulence, and Ueda’s remarks could have significant implications for global markets.
Meanwhile, in the commodities sector, oil prices edged lower as concerns over a U.S. economic slowdown outweighed the bullish impact of declining inventories. Gold, which had approached record highs earlier in the week on the back of Fed rate-cut expectations, faced selling pressure as investors reassessed their positions ahead of the Jackson Hole event.