The U.S. dollar (DXY) found its footing on Monday after sliding hard on Friday when Jerome Powell’s Jackson Hole speech sent traders rushing to price in rate cuts. Against the euro, pound, and yen, the greenback edged higher, though the move was modest compared with last week’s drop.
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Markets had gone into overdrive after Powell cracked the door open to September easing. Now, with the dust settling, traders are trimming some of the more aggressive bets and waiting for confirmation in the data.
Markets Recalibrate after the Shock
Friday was a gut punch for the dollar as investors rushed to dump positions. By Monday, that chaos looked more orderly. The slight recovery shows that while Ponvwell surprised markets with his dovish tone, the Fed is still data-dependent. Strong jobs or inflation numbers in the coming weeks could slow or even pause the easing story.
Gold, which spiked on Friday, eased back slightly as the dollar regained some strength. The interplay between the two underscored how sensitive markets are to every shift in Fed expectations.
Global Markets React to Powell
Asian and European markets took their cues from the U.S. tone. Stocks across Hong Kong, Tokyo, and Shanghai pushed higher on hopes that easier U.S. policy could keep liquidity flowing globally. For export-heavy economies, a softer dollar would be welcome news. But with earnings like Nvidia’s (NVDA) looming this week, traders remain cautious about how long the optimism lasts.
Meanwhile, the Canadian dollar rallied as well, adding to the picture of global currencies repositioning around the Fed’s shift. Moves in Ottawa on tariffs and trade only added fuel to that momentum.
Traders Look ahead to Key Data
For all the noise around Powell’s remarks, the next move hinges on upcoming numbers. Payrolls, wage growth, and inflation data will decide whether September really brings the cut traders are now betting on. Markets are currently pricing it as almost a sure thing, but history shows the Fed is willing to change course if the data demands it.
For now, the dollar has stopped the bleeding. It’s down to whether Powell’s words mark the start of a lasting trend or just another moment of market overreaction.
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