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European stock markets made gains on Wednesday, rebounding from earlier losses, while Asian markets declined as investors awaited a key speech by US Federal Reserve Chair Jerome Powell later this week.

Market participants are eager for clues from Powell regarding the possibility of an interest rate cut, which is widely anticipated during his address at the annual central bank symposium in Jackson Hole, Wyoming, on Friday.

By midday, major European indices in London, Paris, and Frankfurt were trading higher, reversing earlier trends in Asia where key indices closed in negative territory. “In the absence of significant data releases, the European rebound appears to be fueled by optimism ahead of the Jackson Hole meeting and the potential for Fed rate cuts,” commented Ipek Ozkardeskaya, an analyst at Swissquote Bank, in a statement to AFP. Meanwhile, Wall Street’s main indices fell on Tuesday, breaking an eight-day winning streak.

Earlier this month, markets had retreated due to weak US economic data, sparking fears of a potential recession in the world’s largest economy. However, recent stronger indicators, such as healthy retail sales and easing inflation, have revived hopes that the Fed might achieve a “soft landing” for the economy, avoiding a recession.

Investors are also closely watching the release of revised US payroll data, expected later on Wednesday, which could provide further insight into the Fed’s upcoming actions. Analysts generally expect the Fed to implement a rate cut at its next meeting in September, following a series of rate hikes that have brought interest rates to a 23-year high in an effort to curb inflation.

The main question now is whether the Fed will opt for a modest 0.25 percentage point reduction or a more substantial cut. “After a tumultuous few weeks with little connection to underlying fundamentals, markets seem to have settled on the expectation of a 25 basis point Fed rate cut at its September 18 meeting,” noted Holger Schmieding, chief economist at Berenberg Bank. Other central banks, including the European Central Bank and the Bank of England, have already begun to lower borrowing costs.

In line with this trend, Sweden’s Riksbank reduced its policy rate for the second time this year on Tuesday, while New Zealand made its first rate cut since early 2020 last week. The US dollar steadied against the pound and euro on Tuesday after declining in recent weeks due to the prospect of lower interest rates, which tend to make the dollar less attractive to investors in assets like bonds.

Gold prices also saw a decline, falling to $2,506 after reaching a record high of over $2,530 on Tuesday. The anticipation of a Fed rate cut, which would typically make gold more attractive to investors, has been a driving factor in the recent volatility of gold prices.