Who Let the Doves Out?
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Why did Jerome Powell’s Jackson Hole speech unleash a dovish market rally?
So Jerome Powell has let the doves out. Rates will go down in September, it seems. Too soon? Well, obviously not soon enough for President Trump. We'll look at how the markets reacted to Friday's news from Jackson Hole. Another dovish pivot. And Aussie inflation is out this week and U.S. consumption data as well. It's Monday, the 25th of August, 2025. It's the Morning Call from NAB. Good morning. Well, U.S. equities bounced back on Friday, particularly the Russell 2000, which was up 3.9% and up 3.3% across the week. The Nasdaq climbed 1.9% on Friday, 1.5% for the S&P. But over the week, the Nasdaq was actually down by 0.6%, even with that rise on Friday. And 10-year treasuries were down over seven basis points on Friday and down almost 10 basis points for two- and five-year yields.
Over the week, 10-year treasuries were a little over six basis points down, about the same as German bunds, whereas Australian 10-years were up three-and-a-half basis points last week. We saw quite a drop in the US dollar on Friday. The DXY down 0.9%. The Aussie was up 1.1%. The euro also up 1.1%. Over the week, the winner, though, was the Norwegian kroner, climbing 1.3%. And Brent oil was up almost 2.9% last week, finishing the week up at 67.73 a barrel. WTI was up 1.4%. But in both cases, very little of that change happened on Friday afternoon. So, no surprise in those bond movements in the United States and the boost to equities, because there was quite a response to Jerome Powell's comments at Jackson Hole.
Here's Nabs Ray Attrell to talk about it. That market reaction was because he was, it's fair to say, more dovish than anyone had
anticipated. Yeah, morning, Phil. It certainly did.
How did U.S. and Australian bond markets react to the Powell dovish pivot?
I don't think markets were really positioned for, if you want to call it a dovish pivot, but I think undeniably, even though, as we'll talk about, Going through the bit of the details of the speech, there's a lot of caution there, and it wouldn't be hard pressed to say that it was really dovish. But a couple of quotes that the market latched onto at the beginning of and the end of Powell's speech, one of which is that he said that the balance of risks may be shifting. That's in relation to the Fed's dual mandate and that with policy in restrictive territory changing. The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance. So that's about as explicit, I think, as a Fed official would be.
Yeah, quite a lot of the use of the word may in there, wasn't there? Well, that's right. the ultimate weasel word isn't it may well we only said it may happen but uh and i think that um you know our interpretation is that the onus now is probably on the the intervening data to stop the fed from cutting whereas i think that uh the view going into it that was that we probably needed to see further confirmation particularly in respect to the labor market to get a cut over the line. So obviously, if we were to get, you know, a real bounce back in the non-farm payrolls numbers, for example, then I think that, you know, markets would say, well, maybe not. And to be fair, pricing only moved at a couple of basis points.
I think on Thursday night, we had about 18 basis points of cuts priced for the September 17th meeting decision. And that's gone out to about 20 basis points. And the market's now got a little over 50 basis points price for the end of the year. It was about 47 basis points, I think, as of there. But there's no doubt that it was the payrolls numbers that clearly had an impact there. Powell said that, excuse me, The July employment report released earlier this month showed that payrolls growth slowed to an average pace of only 35,000 per month over the past three months and down from an average of 168,000 during 2024. And this is a much larger – this slowdown is much larger than assessed just a month ago.
The earlier figures for May and June were revised down substantially. So it's clear that payrolls
– Yeah, we've played into it, for sure. But Beth Hammock had a bit to say about that, and she's on the board of the Fed since February.
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Chapters
8 chapters
1
Why did Jerome Powell’s Jackson Hole speech unleash a dovish market rally?
0:01–1:43
2
How did U.S. and Australian bond markets react to the Powell dovish pivot?
1:43–4:38
3
What did Ray Attrell say about the likelihood of a September rate cut?
4:38–7:22
4
How could President Trump’s push to remove Lisa Cook affect Fed independence and rate‑cut expectations?
7:22–11:04
5
What changes to the Fed’s inflation‑targeting framework were highlighted after Jackson Hole?
11:04–13:38
6
How are Canada’s tariff cuts and strong retail sales influencing the Canadian dollar?
13:38–15:55
7
Which upcoming economic releases could shape market direction this week?
15:55–16:59
8
What are the key takeaways and outlook from today’s Morning Call?
16:59–17:06