Warsh's Hawkish Tone Sparks Rate Hike Fears
Financial markets were quiet for most of the final week of summer, but Fed Chairman Warsh's speech at Jackson Hole on Friday sent shockwaves through the economy. Markets had been expecting a more dovish tone from the Fed, but instead, Warsh expressed concern about inflation and its potential impact on the US economy.
The increased expectation of a September rate hike rose to around 62%, up from 33% before the speech. This led to a strengthening of the U.S. dollar, with USD/JPY moving higher above 160. Gold prices fell sharply as investors adjusted their expectations for interest rates.
NVIDIA's better-than-expected earnings and strong third-quarter revenue outlook provided some support for technology stocks. However, markets will be closely watching Friday's US employment report, especially after last month's unexpectedly weak jobs data.