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European indices completely erased their gains from the initial part of the session due to weakening investor sentiment on Wall Street. DAX and CAC40 closed the session flat, while FTSE gained 0.21%.
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The German IFO index surprised negatively, and there are indications of a possible narrative being developed within the ECB about maintaining unchanged rates in September due to Germany's weaker economy.
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The August IFO index for Germany reached 85.7 compared to forecasts of 86.8 and the previous 87.3. Both current conditions and expectations also surprised negatively. The current conditions dropped to 82.6 from the previous 83.5, contrary to the market's anticipation of a slight improvement.
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WIG20 retreated over 0.4% and closed the session near the psychological support level of 2000 points. Tauron and 11bit's financial results were disappointing.
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Jerome Powell's Jackson Hole conference exhibited a rather hawkish stance. He paved the way for further rate hikes, noting that combating inflation amidst the growing US economy could be challenging, and the neutral interest rate might have been miscalculated. No comments were made about potential rate hikes or maintaining rates at the current level.
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The chances of a September rate hike have risen to 20%, with expectations increasing for further hikes in November and December.
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Wall Street indices quickly erased their initial gains after Powell's speech, but have slightly rebounded since. Nasdaq remains flat, S&P 500 gains 0.2%, and Dow Jones advances by 0.44%.
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US macroeconomic data performed poorly today. Consumer sentiment according to the University of Michigan dropped to 69.5 from the previous 71.2, below the forecast of 71.2. Current and future assessments also declined. Short-term (3.5% vs. 3.3% previously) and long-term inflation expectations (3% vs. 2.9% previously) rose briefly.
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Harker from the Fed indicated no immediate need for rate hikes, but rate cuts will be considered at the earliest next year. If price pressures rise again, the Fed will raise rates more.
EURUSD rebounds slightly after sharp declines during Jerome Powell's speech. On the M30 timeframe, the currency pair is still in a downtrend, showing a 0.20% decline today. After the hawkish comments from Fed members, downward pressure might continue.
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