By Alden Bentley
Breaking News: Dollar Falls and Sterling Surges After Fed Chair Powell Signals Rate Cut
In a major announcement, Federal Reserve Chair Jerome Powell hinted at an upcoming U.S. interest rate cut, causing the dollar to weaken and sterling to reach a two-year high. The euro also saw gains, hitting a 13-month high, while the U.S. currency dropped to a 17-day low against the yen.
During his keynote speech at the Kansas City Fed’s economic conference, Powell stated, “The time has come for policy to adjust,” citing decreased inflation risks and increased employment concerns. Traders are now betting on a quarter-percentage-point rate cut at the Fed’s September meeting, with odds at 65% after Powell’s remarks.
If the Fed does cut rates in September, it would mark a significant shift away from the restrictive policy in place since 2022. This move is expected to align the Fed with other major banks that have already cut rates.
Market reactions have been mixed, with the dollar weakening and bond yields dropping. However, analysts suggest that a larger 50-basis point cut could be possible in the near future if labor market conditions continue to deteriorate.
Overall, the expectation for a rate cut from the Fed is driving the dollar lower against other major currencies, including the euro, yen, and sterling.
Analysis: The potential rate cut by the Fed could have a significant impact on global markets and individual finances. Lower interest rates typically lead to increased borrowing, spending, and investment, but can also weaken a country’s currency. Consumers may benefit from lower borrowing costs, while investors may need to adjust their portfolios to account for changing market conditions.