Financial markets are on edge as traders await Federal Reserve Chair Jerome Powell’s upcoming speech on Friday, with expectations mounting that he may signal the central bank’s readiness to begin cutting interest rates. Amid this anticipation, U.S. Treasury 10-year yields remained steady, reflecting a cautious optimism in the bond market.
The bullish sentiment in equities has been bolstered by continued gains in the U.S., where the S&P 500 extended its winning streak to eight consecutive sessions. This optimism has also rippled across global markets, with Asian currencies reaching their highest levels since January. Meanwhile, oil prices extended their biggest decline in two weeks following reports that Israel had accepted a cease-fire proposal in Gaza.
Investors are increasingly betting that the Federal Reserve may soon initiate a series of rate cuts, possibly as early as September. This expectation has kept equity markets buoyant, even as recent volatility and economic uncertainty linger. A slew of recent economic data has contributed to this optimism, easing fears of a significant slowdown in U.S. growth while not stoking concerns of runaway inflation.
Market participants have taken note of a more dovish tone from Fed officials in recent weeks, with several policymakers hinting at the possibility of easing monetary policy. This shift in sentiment has set the stage for Powell’s speech at Jackson Hole, where many investors are hoping he will signal the Fed’s intentions to begin lowering rates. The prevailing sentiment suggests that Powell’s remarks could be the catalyst for a further rally in markets, particularly if he hints at a “hole in one” moment by confirming the market’s expectations for imminent rate cuts.