Will Powell remain hawkish❓

🏛️Jerome Powell's speech in Jackson Hole today at 4:00 pm CET

• Markets expect Powell to sound hawkish, emphasizing the priority of fighting inflation.
• Powell's comments will determine the direction of Fed policy at its September meeting - markets currently estimate a 69.3% chance of a 25bp cut.
• Powell will certainly base his statement on the macro data he has seen, and these are mixed.
• On the one hand, CPI and NFP data came in lower than expected, but GDP and PMI data surprised with higher readings.
• Any signals of an extension of the restrictive cycle will be particularly negative for companies dependent on cheap credit (mainly those with lower market capitalization).

In his speech at the Jackson Hole symposium, Jerome Powell will most likely continue his rhetoric focused on consistently fighting inflation, confirming the hawkish tone of communication. Although July macroeconomic data, both from the labor market and inflation indicators, turned out to be stronger than expected, the FOMC continues to emphasize the persistent risks and uncertainties surrounding the further development of the economy. The Fed's last meeting did not result in a decision to cut rates, and the market is gradually revising its expectations for further policy easing. Powell's comments will be key to the September decisions, but most signals suggest caution and maintaining current rates.

Here are the key macroeconomic data released after the last Fed meeting and their interpretation in relation to expectations:

• CPI inflation in July: The annual CPI inflation rate remained at 2.7% in July, which was in line with or slightly below forecasts (2.8% expected). Monthly CPI growth was 0.2%, also in line with expectations, while core CPI rose less than forecast (2.9% vs. 3% expected). Inflation readings are therefore slightly dovish relative to the most hawkish fears, although still above the Fed's target.
• Job market: In July, nonfarm payrolls grew by only 73,000, compared to the consensus estimate of 115,000 – significantly weaker than expected. However, it is worth noting that the previous two NFP reports were revised significantly downward. On the other hand, the latest weekly data on new unemployment benefit claims (initial jobless claims) in mid-August were higher than expected (235,000 vs. 226,000 consensus). Labor market data are perceived as dovish, suggesting a cooling of the labor market.
• GDP: The latest GDP data for the second quarter showed growth of 3% (annualized), mainly due to lower imports and solid consumption, while forecasts for the third quarter are more cautious and suggest a slowdown in growth.
• PMI: The latest PMI data for the US turned out to be very good and clearly above market expectations. In July 2025, the Composite PMI rose to 55.1 points from 52.9 in June, beating earlier forecasts and setting a 7-month high. The service sector showed the fastest growth rate since December last year, while industrial production also recorded growth, albeit at a more moderate pace. (hawkish)

The closer we get to September, the more the market is scaling back its bets on a certain rate cut by the Fed. At the moment, the probability of this happening stands at 69.3% (a week ago it was close to 82%). Source: FED Watch Tool by CME

The US dollar remains strong in the face of the Fed chair's potentially hawkish stance. However, it should be remembered that expectations for Jackson Hole are polarized, but most believe that Powell will not decide on a significant change in policy direction so as not to undermine the Fed's credibility. Recent statements by the central bank chief have indicated that the institution will maintain its independence in the face of political pressure and pressure from the Donald Trump administration.

However, even a slight change in the banker's attitude toward interest rates could significantly affect the valuation of stocks, bonds, and currencies. The economic backdrop, looking at macro data, is becoming increasingly unfavorable for maintaining high rates (weak labor market and lower CPI readings). Today's speech, scheduled for 4:00 pm CET, will show what the most important Fed banker is more concerned about.

Technical Analysis - EURUSD

The EURUSD pair is clearly losing ground during today's session. The scale of the declines pushes the pair below the lower range of historical quotes calculated by Bollinger Bands with +-2 standard deviations for the last 14 sessions, which shows that the end of the week on this instrument was dominated by sellers. The RSI indicator, also for the last 14 sessions, is falling to its lowest levels since the beginning of this month. The long-term upward trend has been disrupted by the break of the 50-day EMA (blue curve on the chart, now constituting an important technical resistance), but it cannot be ruled out that the 100-day EMA (purple curve), which stopped the recent declines at the end of July, may also act as a stabilizer.

Source: xStation