Dollar Slips as Powell Hints at Possible September Fed Rate Cut

The US dollar fell on Friday (August 22, 2025) after Federal Reserve Chair Jerome Powell signaled the possibility of a rate cut at the central bank’s September meeting, though he stopped short of confirming any decision on lowering interest rates.

Powell’s Remarks at Jackson Hole

Speaking at the Federal Reserve’s annual economic conference in Jackson Hole, Wyoming, Powell noted an unusual balance in the labor market.

“While the labour market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising. And if those risks materialise, they can do so quickly,” Powell told international economists and policymakers.

Dollar Index and Currency Movements

Following Powell’s comments, the dollar index, which tracks the greenback against a basket of major currencies including the euro and yen, dropped 0.43% to 98.18.

Earlier, it was trading around 98.7.
The euro gained 0.51%, trading at $1.1664, while the dollar weakened 0.51% against the Japanese yen, settling at 147.61.

Gold Prices Ease Amid Dollar Strength

Gold prices slipped on Friday as a stronger US dollar weighed on demand and investors remained cautious ahead of Powell’s speech.

Spot gold fell 0.2% to $3,333.01 per ounce by 0353 GMT, while US gold futures for December delivery declined 0.2% to $3,376 an ounce.
In India, domestic gold prices reflected the global caution.

Rates stood at ₹1 lakh per 10 grams for 24 karat gold, ₹92,150 for 22 karat, and ₹75,400 for 18 karat, according to Goodreturns.

Markets Await Clarity on Fed’s Policy Path

The dollar index hovered near a two-week high, diminishing gold’s appeal for overseas buyers. Market watchers looked to Powell’s scheduled remarks at 1400 GMT for signals on whether the Fed was leaning toward easing monetary policy.

According to CME’s FedWatch tool, futures markets currently place a 75% probability on a quarter-point rate cut next month.

Tim Waterer, chief market analyst at KCM Trade, said the dollar’s strength could be short-lived if Powell’s comments were seen as dovish. “If Powell’s message is interpreted as a dovish shift, the USD could be undone, and gold may be on the move higher again,” he said.

Mixed Economic Signals

Recent US data has painted a mixed picture for policymakers. Weekly jobless claims rose by the most in nearly three months, and earlier unemployment claims reached a near four-year high.

However, inflation remains above the Fed’s 2% target and could edge higher due to tariffs on imports.

Indian Bullion Market Reflects Global Trends

The cautious tone of global markets was mirrored in India.

Aksha Kamboj, Vice President of the India Bullion & Jewellers Association (IBJA), explained, “Waning safe-haven interest and a firming US dollar have pressured gold, resulting in modest losses in trading volumes. Technical support and short-covering could provide limited downside protection, but traders remain watchful of U.S. macroeconomic signals.”

Darshan Desai, CEO of Aspect Bullion & Refinery, pointed to recent US manufacturing data as another factor reducing expectations of a quick rate cut.

“Any hawkish signals from Powell regarding the future path of interest rates could intensify pressure on gold, prompting investors to lock in profits. Additionally, continued strength in the U.S. dollar poses a further headwind for the yellow metal,” Desai said.

Technical Outlook for Gold

Market analysts highlighted the volatility in bullion ahead of Powell’s remarks.
Rahul Kalantri, VP Commodities at Mehta Equities, provided a technical perspective: “Gold has support at $3,310–3,285 an ounce and resistance at $3,357–3,374 an ounce. In rupee terms, gold has support at ₹99,050–98,750 per 10 grams and resistance at ₹99,650–99,950 per 10 grams.”

The dollar’s decline and gold’s cautious movement underline the uncertainty hanging over global markets as investors await clearer guidance from the Federal Reserve.

Powell’s comments have increased expectations of a September rate cut, but ongoing inflationary pressures and mixed economic data continue to complicate the outlook for US monetary policy.