**Forex Market Outlook: US Dollar Rebounds as Fed Signals Persistent Hawkish Stance**
*Based on the original article by Emmanuel, Mitrade News, August 26, 2025. Additional research has been used to expand the topic.*
The US dollar staged a notable recovery in the global foreign exchange (Forex) market following continued hawkish guidance from the Federal Reserve. As the markets received and digested remarks from Fed Chair Jerome Powell during the Jackson Hole Symposium, traders began reevaluating expectations regarding interest rate cuts and monetary policy easing in the coming months. This article explores the major highlights from Powell’s speech, examines broader US economic indicators, and discusses the impact on global currency pairs.
## Key Highlights from Jerome Powell’s Jackson Hole Remarks
During the closely watched annual Jackson Hole Economic Symposium, Fed Chair Jerome Powell acknowledged that inflation has come down from its post-pandemic peak, but he strongly reiterated that the Fed’s job is not yet done. His comments underscored the central bank’s commitment to achieving its long-term inflation target of 2 percent, even if it means keeping rates elevated for longer.
Key points from Powell’s speech:
– **Inflation remains above target:** Powell emphasized that despite considerable progress, inflation is still above the Fed’s desired 2 percent level.
– **Data-dependent approach:** Future rate decisions will depend on incoming economic data, particularly on inflation trends and labor market performance.
– **Potential for further rate hikes:** Although the Fed is likely near the peak of the current tightening cycle, Powell left the door open for further rate increases if inflation proves persistent.
– **No urgent rush to cut rates:** Markets anticipating quick rate cuts in 2025 may have to reconsider, as the Fed prefers to maintain a restrictive policy until inflation is sustainably under control.
Markets interpreted these remarks as a sign that interest rate cuts are not imminent, sparking a bullish reaction in the US dollar.
## US Dollar Index Rebounds
The US Dollar Index (DXY), which tracks the greenback against a basket of six major global currencies, made a firm recovery, bouncing off recent lows and rising to near-term resistance levels. Several factors contributed to this rebound:
– **Higher Treasury yields:** US 10-year Treasury yields rose to around 4.25 percent, reflecting expectations of prolonged high interest rates.
– **Safe-haven demand:** Risk-off sentiment in global markets increased demand for the dollar, traditionally considered a safe-haven asset.
– **Technical support levels:** The DXY found technical support near the 103.00 level, which encouraged fresh buying in the dollar.
As of late August 2025, the DXY was approaching the 104.50 zone, a key resistance level that traders are watching for potential breakout or reversal scenarios.
## Impact on Major Forex Pairs
The resurgence in the US dollar had notable consequences for major currency pairs. Here is how some of the most traded pairs were affected:
### EUR/USD
– The euro came under pressure as the dollar recovered, pushing the EUR/USD pair lower.
– The pair fell below the 1.0800 handle, with near-term support seen around 1.0760.
– European Central Bank (ECB) policymakers have also taken a cautious tone, expressing concerns about the eurozone’s weak growth outlook.
– Dovish tones from the ECB contrast with the Fed’s hawkish stance, further widening the policy divergence and weighing on the euro.
### GBP/USD
– The British pound fell below the 1.2600 level against the dollar.
– The Bank of England faces a challenging macroeconomic environment as inflation remains high while consumer demand softens.
– With the US Fed maintaining a firmer policy stance, GBP/USD remains vulnerable to further downside.
### USD/JPY
– The Japanese yen weakened sharply as the yield differential between the US and Japan widened.
– The Bank of Japan continues to maintain ultra-loose monetary policy, with little sign of rate normalization in the near term.
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Read more on USD/CAD trading.