Markets React to Powell’s Dovish Tone: Gold Slips, USD Mixed Across Majors | 25th August 2025

Powell Moves Markets

As traders digest Fed Chair Jerome Powell’s dovish tone from Jackson Hole, major currency pairs are reacting with mixed momentum. Gold prices dipped despite rate cut optimism, while USD/CAD and NZD/USD struggled to find clear direction amid soft economic data and central bank recalibrations. The euro and Australian dollar both retreated against a resilient greenback, underscoring the market’s cautious stance ahead of key U.S. GDP and inflation releases. With rate cut bets rising and geopolitical tensions simmering, volatility remains front and center across global FX markets.

Gold (XAU/USD) Forecast

Current Price and Context

Gold (XAU/USD) is edging lower near $3,365 in early Asian trading, down 0.22% on the day. Despite dovish remarks from Fed Chair Jerome Powell at Jackson Hole, the yellow metal remains under pressure from a firmer U.S. dollar. Traders are pricing in an 85% chance of a 25bps rate cut next month, up from 75% before Powell’s speech, but rising inflation risks and cautious sentiment ahead of Thursday’s Q2 GDP release are keeping gold’s upside in check.

Key Drivers

Geopolitical Risks: Escalating Russia-Ukraine tensions are offering mild safe-haven support, though not enough to offset dollar strength.

US Economic Data: Markets await the Q2 GDP report, expected at 3.0%. A stronger print could reinforce dollar strength and pressure gold further.

FOMC Outcome: Powell’s dovish tone has lifted rate cut expectations, but his warning on upside inflation risks tempers gold’s bullish case.

Trade Policy: No major trade developments impacting gold directly today.

Monetary Policy: Rising rate cut bets typically support gold, but the dollar’s resilience and inflation uncertainty are capping gains.

Technical Outlook

Trend: Mildly bearish — gold is slipping despite dovish Fed signals, weighed down by dollar strength.

Resistance: Immediate resistance lies near $3,375–$3,380.

Support: Key support is seen around $3,350, with deeper downside risk toward $3,330 if selling intensifies.

Forecast: Expect consolidation between $3,330–$3,380 ahead of Thursday’s GDP release. A strong print could push gold lower; a weak outcome may revive bullish interest.

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Publication date:

25 August 2025 - 11:32 (GMT)

Sentiment and Catalysts

Market Sentiment: Cautiously bearish — traders remain hesitant amid mixed signals from Powell and inflation data.

Catalysts: Watch for the Q2 GDP release and any escalation in geopolitical tensions. These will be pivotal in determining gold’s next move.

Current Price and Context

NZD/USD is trading around 0.5860 in early Asia, holding steady after a modest pullback from last week’s gains. The pair showed resilience following New Zealand’s Q2 Retail Sales report, which printed a 0.5% QoQ rise—beating expectations of 0.2% but slowing from Q1’s 0.8% growth. Despite the stronger data, the kiwi remains capped by broader USD strength and cautious sentiment surrounding the Fed’s next move. Traders are now pricing in an 87% chance of a 25bps Fed rate cut in September, up from 75% before Powell’s Jackson Hole speech.

Geopolitical Risks: No major geopolitical tensions influencing NZD/USD today.

US Economic Data: Focus shifts to upcoming U.S. GDP and PCE inflation data, which could reinforce or challenge current Fed rate cut expectations.

FOMC Outcome: Powell’s dovish tone has lifted rate cut odds, but his inflation warnings keep USD demand intact.

Monetary Policy: RBNZ’s recent 25bps rate cut to 3.00% signals a dovish tilt, while Fed policy remains data-dependent. Diverging stances may limit kiwi upside.

Trend: Neutral — the pair is consolidating after a brief rally, lacking strong directional conviction.

Resistance: Immediate resistance lies near 0.5880–0.5900.

Support: Support is seen around 0.5830–0.5840; a break below could expose 0.5800.
Forecast: Range-bound trading between 0.5830–0.5900 ahead of key U.S. data. A dovish Fed or weak U.S. prints may lift NZD/USD, while strong data could pressure it lower.

Sentiment and Catalysts

Market Sentiment: Cautiously neutral — traders are balancing upbeat NZ data against Fed-driven USD strength.

Catalysts: Watch for U.S. GDP and PCE inflation data, as well as any fresh RBNZ commentary on future rate moves.

Current Price and Context

EUR/USD is trading near 1.1700 in early Monday action, retreating from Friday’s four-week high of 1.1742. The euro’s recent rally was fueled by rising Fed rate cut expectations following Powell’s dovish remarks at Jackson Hole. However, the pair has since softened as traders digest mixed signals from both the Fed and ECB. While Powell acknowledged growing risks to the labor market, he also emphasized persistent inflation concerns. ECB officials, meanwhile, signaled a pause in rate cuts unless the economic outlook deteriorates significantly.

Geopolitical Risks: Elevated tensions in Eastern Europe and the Middle East are adding mild safe-haven demand to the dollar, indirectly weighing on the euro.

US Economic Data: Traders await Q2 GDP and July PCE inflation data later this week. Strong prints could reinforce dollar strength and pressure EUR/USD.

FOMC Outcome: Powell’s dovish tone lifted rate cut odds to 85%, but his inflation warnings have kept dollar demand resilient.

Trade Policy: No fresh trade developments directly impacting the pair today.

Monetary Policy: The Fed leans dovish but remains data-dependent. The ECB is signaling a pause in easing, creating a divergence that may limit euro upside.

Trend: Mildly bearish — EUR/USD is pulling back from recent highs, lacking strong bullish momentum.

Resistance: Immediate resistance lies near 1.1720–1.1740.

Support: Key support is seen around 1.1670–1.1680; a break below could expose 1.1650.

Forecast: Expect consolidation between 1.1670–1.1740 ahead of U.S. data. A strong GDP or PCE print may pressure the euro, while weaker figures could revive bullish interest.

Sentiment and Catalysts

Market Sentiment: Cautiously neutral — traders are balancing dovish Fed signals against the ECB’s steady stance and geopolitical undercurrents.

Catalysts: Watch for U.S. GDP and PCE inflation data, as well as ECB commentary on growth and inflation outlook. Geopolitical developments may also influence safe-haven flows.

Australian Dollar (AUD/USD) Forecast

Current Price and Context

AUD/USD is trading around 0.6480 in early Asia, slipping after a strong rebound last week. Despite an 87% probability of a Fed rate cut in September, the U.S. dollar is regaining ground, supported by resilient PMI data and cautious Fed commentary. Meanwhile, the Reserve Bank of Australia (RBA) is expected to resume easing with a larger 50bps rate cut in November, adding pressure to the Aussie. Traders are watching confluence resistance near 0.6500, where technical momentum may shift.

Geopolitical Risks: Elevated tensions in the Middle East and Eastern Europe are fueling mild safe-haven flows into the U.S. dollar, indirectly weighing on AUD.

US Economic Data: Strong PMI readings and rising jobless claims highlight the Fed’s challenge of balancing inflation with labor market softness. Q2 GDP and PCE inflation data are key upcoming catalysts.

FOMC Outcome: Powell’s dovish tone lifted rate cut odds to 87%, but inflation concerns and mixed Fed commentary are keeping dollar demand firm.

Monetary Policy: The RBA is expected to cut rates by 50bps in November, while the Fed remains data-dependent. Diverging paths are tilting sentiment against the Aussie.

Trend: Mildly bearish — AUD/USD is retreating from recent highs, testing key resistance.

Resistance: Immediate resistance lies near 0.6490–0.6500, aligned with the 50-day EMA and descending channel top.

Support: Initial support is seen at 0.6475 (9-day EMA), followed by 0.6414 and 0.6372 if bearish momentum accelerates.

Forecast: Expect consolidation between 0.6415–0.6500. A break above resistance could open the path to 0.6568, while downside risks remain if U.S. data surprises to the upside.

Sentiment and Catalysts

Market Sentiment: Cautiously bearish — traders are wary of RBA dovishness and resilient U.S. data.

Catalysts: Watch for U.S. GDP and PCE inflation releases, as well as any RBA commentary on future rate moves. Geopolitical headlines may also sway sentiment.

Current Price and Context

USD/CAD is trading near 1.3820 in early Asian hours, struggling to recover after a sharp 0.8% drop on Friday. The pair remains under pressure following Fed Chair Jerome Powell’s dovish remarks at Jackson Hole, where he signaled openness to adjusting policy amid rising employment risks. While the U.S. Dollar Index (DXY) is attempting a mild rebound, it remains near a four-week low below 98.00. Traders are now eyeing key U.S. data releases this week, including Durable Goods Orders and PCE inflation, alongside Canada’s Q2 GDP figures due Friday.

Geopolitical Risks: Elevated tensions in Eastern Europe and the Middle East are supporting mild safe-haven flows, but not enough to lift USD/CAD meaningfully.

US Economic Data: A Durable Goods and PCE inflation data are in focus. Strong prints could revive dollar strength, while weak figures may deepen USD/CAD losses.

FOMC Outcome: Powell’s dovish tone has pushed rate cut odds to 87%, but inflation risks remain, keeping traders cautious.

Monetary Policy: The Fed is leaning dovish, while the Bank of Canada is expected to hold rates steady. Diverging expectations are favoring CAD resilience.

Trend: Mildly bearish — USD/CAD is under pressure, struggling to regain bullish momentum.

Resistance: Immediate resistance lies near 1.3850–1.3880; a break above could retest 1.3900.

Support: Key support is seen around 1.3800, followed by 1.3770 if downside pressure intensifies.

Forecast: Expect consolidation between 1.3770–1.3880 ahead of U.S. and Canadian data. A strong U.S. print may lift USD/CAD, while soft figures could extend the decline.

Sentiment and Catalysts

Market Sentiment: Cautiously bearish — traders are digesting Powell’s dovish tone and awaiting confirmation from upcoming data.

Catalysts: Watch for U.S. PCE inflation and Durable Goods Orders, along with Canada’s Q2 GDP. These will be pivotal in shaping near-term USD/CAD direction.

As global markets digest Powell’s dovish tone and mixed macro data, FX traders are navigating a landscape marked by cautious optimism and persistent dollar strength. While rate cut expectations are rising, the greenback continues to assert dominance across key pairs, fueled by safe-haven flows and resilient U.S. fundamentals. Commodity-linked currencies like the AUD and CAD remain vulnerable to central bank divergence, while the euro and kiwi tread water ahead of fresh economic signals. With volatility simmering and directional conviction still elusive, traders should stay nimble and alert to upcoming data releases and policy commentary that could reshape momentum across the board.

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