European Stocks Rise as Fed Chair Signals Lower Rates

The Stoxx 600 index experienced a modest increase of 0.32% by late afternoon in London, building on earlier gains. The British pound surged 0.83% against the U.S. dollar, reaching $1.319, marking its highest level in over two years. Meanwhile, the euro also strengthened, rising 0.5% to $1.117, reflecting a positive sentiment in European markets. In a highly anticipated keynote address at the Federal Reserve's annual retreat in Jackson Hole, Wyoming, Chair Jerome Powell indicated a shift in monetary policy. He stated, "The time has come for policy to adjust," emphasizing that future rate cuts will be contingent on incoming economic data and the evolving outlook. Powell noted a significant decline in inflation, allowing the Fed to focus on bolstering the labor market. Following Powell's remarks, U.S. markets reacted positively, with stocks rallying on Friday morning. Investors had already anticipated a rate cut in September, with the likelihood of a 25 basis point reduction now estimated at 67.5%, compared to a more aggressive 50 basis point cut. This shift in expectations reflects growing confidence in the Fed's approach to managing inflation and economic growth. Additionally, Bank of England Governor Andrew Bailey is scheduled to address the Jackson Hole conference on Friday, potentially influencing market dynamics further as central bank leaders discuss their strategies in the current economic climate.