Euro-dollar surges as Powell turns dovish

The EURUSD rallied sharply after hitting a daily low of 1.110,5 as Federal Reserve Chairman Jerome Powell said, “the time has come for policy to adjust,” opening the door to ease policy. Therefore, the major currency pair jumped toward 1.1170 and posted gains of over 0.54%.

In his speech at Jackson Hole, Powell stated that the size and timing of rate cuts would be data-dependent, adopting a stance like the European Central Bank. He added that he’s confident that inflation “is on a sustainable path back to 2%,” adding that those risks have diminished, contrary to increasing risks on employment.

Meanwhile, traders of Fed funds futures had priced in a 33% chance of the Fed cutting its interest rates by 50 basis points at the upcoming September meeting.

In response to Powell’s speech, traders ditched the greenback, and the EURUSD pair hit a new yearly high of 1.1183, before retreating to current exchange rates. At the same time, the US 10-year Treasury note yield dropped four basis points to 3.81%.