The euro, the pound, and other risk assets rose sharply against the dollar, which lost ground following Jerome Powell's speech at Jackson Hole.

The Chair of the U.S. Federal Reserve, Jerome Powell, in his Friday address, signaled that the central bank is likely to lower the interest rate in September, after keeping the base rate unchanged for the first eight months of the year. This anticipated move reflects the ongoing assessment of economic data showing signs of cooling inflation combined with moderate growth. Markets reacted with noticeable enthusiasm, recording an inflow of capital into interest rate–sensitive assets.

However, despite the optimism, analysts caution against excessive confidence. While a rate cut is likely, it still depends on upcoming economic indicators, particularly the August employment and inflation data. Any deviation from expectations could alter the Fed's plans and affect the timing of the rate reduction. Moreover, the global context must be considered. The policies of major central banks, trade relations, and geopolitical factors may significantly influence the Fed's decisions. Therefore, traders should exercise caution and not rely solely on Powell's statements, but instead take into account a broad range of information when forming strategies.

Powell pointed to a shifting balance of risks that may require an adjustment of policy, referring to unexpectedly weak employment data released after the Fed's July meeting. At the same time, he emphasized the continuing risk of higher inflation, fueled by President Donald Trump's tariffs, which could become a subject of debate at the upcoming policy meetings in Washington on September 16–17 regarding both the pace and the very necessity of rate cuts.

Powell also used his speech to update the Federal Reserve's broader monetary policy framework, marking the conclusion of the official review launched late last year.

Fed officials decided to reverse changes introduced in the last review in 2020, reflecting the difference between the policy challenges faced over the past five years and those encountered in the five years before the pandemic. In particular, they abandoned the 2020 strategy that pledged to allow inflation to remain slightly above the 2% target for some time following periods when it had been below target.

Officials also adjusted the way they describe the maximum employment goal: they will no longer prioritize the "shortfall" in achieving it — a 2020 modification that had signaled a departure from the long-standing practice of "preemptive" tightening.

During Saturday's panel featuring the heads of three major central banks, the leaders of the Bank of Japan and the Bank of England refrained from commenting on monetary policy prospects, instead discussing the challenges of expanding the labor force in their countries.

In Japan, where an aging population and low birth rates put pressure on the labor market and fuel inflation, Bank of Japan Governor Kazuo Ueda said that increasing the number of women in full-time employment and hiring more foreign workers could help address the issue.

Bank of England Governor Andrew Bailey noted that the combination of weak labor productivity and low workforce participation has left the UK facing an "acute challenge of raising potential growth rates."

European Central Bank President Christine Lagarde offered a more optimistic message, saying that Europe's labor market had proven surprisingly resilient in the face of a once-in-a-generation inflation shock and aggressive rate hikes.

Technical Picture for EUR/USD: At the moment, buyers need to take control of the 1.1740 level. Only then will they be able to target a test of 1.1780. From there, it is possible to move up to 1.1830, though doing so without support from major players will be difficult. The final upward target is 1.1865. In the event of a decline, I expect significant buying interest to appear around 1.1700. If none emerges, it would be better to wait for a renewal of the 1.1655 low or to open long positions from 1.1625.

Technical Picture for GBP/USD: Pound buyers need to break through the nearest resistance at 1.3530. Only then can they aim for 1.3560, above which a breakout will be more challenging. The furthest upward target is the 1.3590 level. If the pair falls, the bears will attempt to take control of 1.3490. If they succeed, a breakout of the range will deal a serious blow to the bulls' positions and push GBP/USD down to the 1.3455 low, with the prospect of extending the move toward 1.3425.