Market Highlight 13.09.2024

   The European Central Bank (ECB) cut its key interest rate by another 0,25% last night, marking the second reduction in 3 months as it aims to boost the weakening eurozone economy and widen its policy divergence with the U.S Federal Reserve, which is also expected to start cutting rates next week. Major central banks, including the FED, are shifting their focus from fighting inflation to supporting growth as inflation gradually cools toward the 2% target and economic momentum slows. The pace and scale of the upcoming rate cut cycle will be critically important for global financial markets. According to Refinitiv data, the market expects 10 rate cuts of 0,25% from the FED over the next 12 months and 7 cuts from the ECB. ECB President Christine Lagarde stated that eurozone rates are "gradually declining," but the pace and size of rate cuts will still depend on monthly economic data. Consumer demand in Europe has weakened as households cut back on spending, businesses reduce investment, and housing investment declines. Germany, Europe’s largest economy and an industrial powerhouse, is on the brink of recession as industrial output continues to fall. The ECB expects eurozone growth to be +0,8% this year and +1,3% next year, both 0,1% lower than its June forecast. The ECB’s next rate cut is likely to occur in December rather than October, which helped the EUR recover nearly 0,6% yesterday.
   The USD/VND interbank exchange rate briefly adjusted down to 24.530 - a multi-month low - early yesterday afternoon before USD buying at lower levels from payment demands by businesses helped the rate recover to 24.590 by the end of the day. The exchange rate is forecasted to continue its downward adjustment in the final trading day of the week, possibly reaching around 24.500.

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