Powell's Speech Sparks Market Surge: Dow Climbs, Bitcoin Breaks $65K, Dollar Falls

Last Friday, Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole annual conference triggered significant market movements. Powell's remarks, interpreted as the strongest rate cut signal yet, led to a collective rise in the US stock indices. The Dow Jones surged by 1.14%, the Nasdaq by 1.47%, and the S&P 500 climbed 1.15%.
Powell stated it is time to adjust policy and expressed increased confidence in returning inflation to the 2% target. He emphasized that the timing and pace of rate cuts will depend on future economic data, prospects, and risk balance. He noted that while the labor market has cooled, he does not wish for it to deteriorate further. This sentiment pushed Bitcoin above $65,000 for the first time in three weeks, reflecting renewed interest in Bitcoin ETFs.
On Monday, Bitcoin, the world’s largest digital asset, briefly touched $65,030 before settling at around $64,000. This followed a 7.4% weekly increase, its largest since mid-July. Bitcoin ETFs saw a net inflow of $252 million, the highest in over a month, with steady inflows for seven consecutive days. Cici Lu McCalman of Venn Link Partners noted that all eyes are now on the Fed, suggesting that a potential rate cut in September might further bolster Bitcoin.
Furthermore, the dollar index dropped below 101 following Powell's speech, causing non-dollar currencies to rally. Meanwhile, gold experienced a significant 15-minute price fluctuation of $20. The market continues to anticipate a probable 25 basis point rate cut by the Fed in September.
Despite the bullish sentiment for Bitcoin, Ether ETFs saw net outflows on August 23. Ether itself underperformed on Monday, dropping by as much as 1.7%. In contrast, other major tokens remained relatively stable.
Telegram-related token Toncoin faced a price drop following the French arrest of Telegram's co-founder. While the broader digital asset market has been flat, Bitcoin's resurgence highlights its sensitivity to macroeconomic cues, especially potential shifts in Fed policy.
The market's reaction to Powell’s speech underscores the delicate balance the Fed must maintain in managing inflation expectations while supporting economic growth. As Powell highlighted, the forward trajectory remains data-dependent, and August's employment report will be crucial in shaping the Fed's next policy moves. Analysts predict that clearer signs of labor market cooling could hasten and deepen the anticipated rate cuts.