Market Highlight 28.10.2025

The European Central Bank (ECB) is expected to leave its policy rates unchanged for the third consecutive meeting this week, as markets look for clues on whether the rate-cut cycle that began last year has now come to an end. Since the second half of this year, ECB President Christine Lagarde has said the Central Bank is in a “good position” in its fight to rein in inflation, which once soared to a record 10% in 2022. The ECB last cut rates in June this year, lowering the deposit facility rate to 2%, after a gradual reduction from 4% at the end of 2024. Market participants still expect the ECB to deliver another policy rate cut in December, should there be signs that the European economy is recovering slowly from the impact of higher U.S tariffs. Factors that could temper the ECB’s optimism include persistent political instability in France - the eurozone’s second-largest economy, the uncertain effects of new U.S tariffs, and a stronger euro against the dollar, which could rekindle inflationary pressure. Meanwhile, escalating trade tensions between the U.S and China may disrupt global supply chains, adding further upward pressure on prices.

The USD Index slipped 0,14% at the start of the week, as optimism over a potential U.S - China trade agreement reduced demand for the USD. President Donald Trump said on Monday that the U.S and China could reach a trade deal when the leaders of the world’s two largest economies meet in South Korea this Thursday.

Domestically, the interbank USD/VND rate fell to 26.290 early Monday before rebounding to close at 26.305. The downward bias in the exchange rate is expected to persist today, tracking the weaker USD globally as the Federal Reserve begins its October policy meeting.

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