GBP/USD jumps past 1.3500 as Powell leans dovish

• GBP/USD rallies near 1.3500 as Fed Chair Jerome Powell hints at renewed easing cycle during Jackson Hole speech.
• Powell: "Downside risks to the labor market are rising," boosting September cut odds from 75% to 90%.
• Fed balance: tariffs could drive one-time inflation, while stagflation risks emerge from opposing inflation and employment pressures.

The GBP/USD rallies as the Fed Chair Jerome Powell takes the stand at the Jackson Hole Symposium. At the time of writing, the pair trades above 1.3500 after Powell hints that the Fed might be ready to resume its easing cycle.

Markets price in higher odds of a September cut after Powell warns of labor market downside risks

The Fed Chair, Jerome Powell's speech, has increased the odds for a Fed rate cut at the September meeting. Market participants have fully priced in 50 basis points (bps) by year-end, and the chances for a September cut rose from 75% to 90%.

Powell said that "downside risks to the labor market are rising" and that "the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance." He added that "the stability of the unemployment rate and other labor market measures allows us to proceed carefully."

The Fed Chair said that tariffs could create a "one-time" effect in inflation and that it would take some time to be reflected. He mentioned that risks of inflation are tilted to the upside and risks of employment to the downside. Therefore, a possible stagflation scenario looms.

GBP/USD Price Forecast: Technical outlook

The GBP/USD climbed sharply above 1.3500, opening the door for further upside. If the pair rises past 1.3550, it puts into play the August 14 peak of 1.3594 ahead of 1.3600. Conversely, if the pair dives back below 1.3500, the next area of demand would be the August high of 1.3482, before testing 1.3450.