Wall Street indices and gold rallied, while US dollar dropped on Friday after Fed Chair Powell signalled in his Jackson Hole speech that it is time to start lowering rates. Powell said that the time has come to adjust policy rates and that he will do everything he can to support labor market. However, Powell also said that timing and size of rate cuts will depend on the incoming data and balance of risks. Still, his comments seem to have only confirmed what the market was already pricing in as money markets bets on Fed easing did not change much. Currently, money markets price in around 105 basis points of Fed rate cuts by the end of the year, compared to around 100 basis points of cuts priced in prior to Powell's speech. Pricing for the September meeting indicates an around-37% chance of 50 basis point rate cut and an around-63% chance of 25 basis points rate cut.
Powell's comments were enough to spark a rally on Wall Street with S&P 500, Dow Jones and Nasdaq jumping over 1% and small-cap Russell 2000 rallying over 3%. Taking a look at Russell 2000 futures (US2000) chart at D1 interval, we can see that jumped almost 2% during Powell's speech (orange circle) and continue to move higher later on. The index is trading at the highest level since August 1, 2024, and is approaching resistance zone marked with 78.6% retracement of the early-August correction in the 2,250 pts area. Nevertheless, the index still trades around 10% below its all-time highs reached in November 2021.
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Source: xStation5
