Market Highlight 13.06.2025

Tariff-induced inflation has proven to be less severe than anticipated, while signs of a weakening U.S labor market have increased the likelihood that the Federal Reserve may soon lower interest rates in the coming months. The tariffs imposed by President Donald Trump have presented the Federal Reserve with two conflicting challenges. On one hand, higher tariffs drive up consumer prices, limiting the FED’s flexibility to cut rates. On the other hand, tariffs undermine consumer confidence and demand, thereby strengthening the case for rate cuts to support economic activity. Up to now, the FED has focused primarily on the first risk, maintaining the federal funds rate at 4,25% - 4,5% since December 2024. However, should the labor market decelerate more rapidly in the next one to two months, the FED will likely be compelled to take decisive action to support this critical sector.       

Forecasts currently point to two 25-basis-point rate cuts, starting in September and followed by another in December.
The USD Index dropped sharply on Thursday, losing 0,76%, after May inflation data came in weaker than expected, bolstering market expectations that the FED may begin easing monetary policy in the near term. Meanwhile, the Japanese yen gained 0,72% as investors sought safety amid rising geopolitical tensions in the Middle East. A combination of escalating unrest in the Middle East and concerns over the fragility of the U.S - China trade agreement has prompted a broad flight to safe-haven assets across global financial markets.

The USD/VND interbank exchange rate edged up slightly yesterday, trading mostly in the 26.020 - 26.040 range. Despite the USD’s notable decline on global markets, the domestic exchange rate has shown limited correlation, as corporate demand for foreign currency remains robust. The exchange rate is expected to see some downward pressure early today but will likely remain anchored near the 26.000 level.

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