Federal Reserve Chair Jerome Powell signaled a softer stance on monetary policy Friday, sparking a sharp rally across global markets and a steep fall in the U.S. dollar.
Speaking about the “shifting balance of risks” in the U.S. economy, Powell said weakening employment may justify a change in policy. His remarks raised investor expectations that interest rate cuts could come as early as September, with further easing possible in December.
The comments triggered an immediate market reaction. Stocks, bonds, gold, oil, and cryptocurrencies all surged, while the dollar fell sharply. The Dow Jones Industrial Average closed at a record high for the first time since December, and small-cap stocks jumped more than 3% for the week.
Treasury yields dropped significantly, with the two-year yield sliding 12 basis points. The move steepened the yield curve to its highest level since early 2022.
Gold rebounded above its 50-day moving average, while Bitcoin rose 4%, marking its strongest daily performance since April. Ethereum outperformed, soaring 13% to reach a new record high and its strongest level against Bitcoin since September 2024.
The dollar index recorded its biggest one-day decline since April, breaking below key technical support levels.
Market analysts warned, however, that investors may be pricing in both stronger growth and looser monetary policy—an unusual combination. Still, optimism around artificial intelligence spending and expectations of easier financial conditions continue to support high valuations in U.S. equities.
With Powell’s Jackson Hole speech now behind them, traders are bracing for more volatility next week as another round of economic data and policy signals are due.
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