Market Highlight 06.06.2025

   The European Central Bank (ECB) lowered its benchmark interest rate to the lowest level since early 2023 and signaled it may be nearing the end of the monetary easing cycle as inflation continues to moderate. In a widely anticipated decision on Thursday evening, the ECB reduced its main policy rate from 2,25% to 2%, marking the eighth rate cut within a year. This move has widened the interest rate differential with the United States - now approximately 2 percentage points - as the Federal Reserve continues to hold rates at elevated levels. In a press conference following the decision, ECB President Christine Lagarde stated that the central bank is likely approaching the conclusion of its current easing phase. Markets are now pricing in one final rate cut by year-end. However, the growth outlook for the eurozone remains clouded by U.S tariff policy. While a surge in exports - driven by firms front-loading shipments to the U.S ahead of expected tariffs - provided a temporary boost to first-quarter 2025 growth, this momentum is likely to fade in Q2. Most EU exports to the U.S currently face a 10% tariff, and that figure could rise further if a trade agreement between the EU and the U.S is not reached before the July 9 deadline.
  The USD weakened slightly, with the USD Index down more than 0,1% on Thursday, following labor market data suggesting mounting economic pressure from tariff-related headwinds. Initial jobless claims in the U.S rose for the second consecutive week, adding to signs of a softening labor market. These indicators have tempered market expectations ahead of the U.S nonfarm payrolls report due later today.
  Domestically, the interbank USD/VND exchange rate rose above the 26.100 threshold early on Thursday before retreating to around 26.075 by the end of the session. With significant USD payment demand continuing to emerge in the domestic market, the exchange rate is expected to trade in the 26.050 - 26.200 range through the first half of June.

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