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Wednesday, September 17, 2025
What’s happening: The US dollar fell to a four-year low versus the euro, with investors widely expecting the Federal Reserve to announce an interest rate cut.
What happened: Investors also monitored the release of the latest economic data during Tuesday’s session.
The US dollar index, which measures the greenback’s performance versus major peers, declined to its lowest level since July 1.
Why it matters: The greenback had steadied last week, after its sharp decline earlier during the year. However, the US dollar come under pressure with rising speculations of the Fed cutting its benchmark interest rate.
Investors are pricing in a rate cut of at least 25 basis points (BPS), given the softness in the US labour market and renewed pressure from President Donald Trump.
Federal Reserve Chairman Jerome Powell is scheduled to hold a press conference following the release of the policy statement today.
The greenback received some support on Tuesday after data showed higher-than-expected growth in US retail sales in August. Retail sales grew by 0.6% in August, beating market estimates of 0.2%.
Industrial production in the US also rose 0.1% in August, topping market expectations of a 0.1% decline. Despite the positive data releases, investors remain concerned about US economic growth due to weakness in the labour market and inflation.
The euro received a boost from the Eurozone’s industrial production data for July. Output in the 20-nation bloc grew by 0.3% in July, rebounding from a 0.6% decline in June. The figure also exceeded expectations of a 0.4% rise.
Germany’s investor morale also surprisingly climbed in September. The ZEW Indicator of Economic Sentiment for Germany rose to 37.3 in September, from 34.7 in August, topping expectations of 26.3.
The EUR/USD forex pair climbed more than 0.9% to 1.1869 on Tuesday, reaching its strongest level since September 2021. The US dollar index declined around 0.7% to 96.66.
The GBP/USD pair rose to a more than two-month high. Investors expect the Bank of England to keep its benchmark interest rate unchanged this week, after slashing rates last month.
The USD/JPY forex pair declined to a one-month low ahead of the Bank of Japan’s monetary policy meeting on Friday, with investors projecting the central bank to hold interest rates at 0.5%.
What to watch: Investors will monitor the Fed’s announcement of its interest rate decision (2200 UAE Time) today.
Data on building permits (1630 UAE Time) and housing starts (1630 UAE Time), due to be released today, will also remain in focus. Building permits in the US, which fell by 2.2% to an annualised rate of 1.362 million in July, are expected to rise by 0.6% in August. Analysts expect housing starts to decline by 3.4% in August, following a 5.2% gain in July.
Context: Equity markets in Asia rose this morning amid progress in the US-China trade talks.
Details: President Donald Trump said trade talks with China were progressing well, while China criticised a proposal for steep tariffs by the US on China’s products related to Russian oil.
Trump and China’s President Xi Jinping are scheduled to hold a call on Friday to finalise the terms of the deal.
Data released on Wednesday showed Japan’s trade deficit widening to ¥242.50 billion in August, from ¥118.4 billion in July. Exports declined by 0.10% year-over-year in August, following a 2.60% decline in the previous month, while imports dipped by 5.2% in August.
The Asia Dow rose 0.05% to 5,048.42, while Japan’s Nikkei 225 added 0.18% to reach 44,985.19 this morning. China’s Shanghai Composite index climbed 0.41% to 3,877.55, Hong Kong’s Hang Seng index jumped 1.41% to 26,812.16 and India’s Sensex rose 0.24% to 82,577.06.
What to watch: Data on machinery orders and inflation rate from Japan will be released this week. Japan’s core machinery orders, which surged 3% to ¥941.2 billion in June, are projected to decline 1.7% in July. Japan’s annual inflation rate, which fell to 3.1% in July from 3.3% in the previous month, is expected to ease further to 2.8% in August. The Bank of Japan is scheduled to announce its monetary policy decision on Friday.
Other Markets: European indices closed lower on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.88%, 1.77%, 1.00% and 1.14%, respectively.
US President Donald Trump said Ukraine’s President Volodymyr Zelensky will have to make a deal to end the ongoing war and push Europe to stop purchasing oil from Russia. The news sent the RUB/USD pair lower in forex trading this morning.
New Zealand’s current account deficit shrank to NZ$0.97 billion in the second quarter, from NZ$3.3 billion in the year-ago period, exerting pressure on the NZD/USD forex pair.
Canada’s annual core inflation came in at 2.6% in August, unchanged from the previous month, which sent the CAD/USD pair slightly higher in forex trading this morning.
Colombia’s industrial production surged 5.8% year-over-year in July, from 2.2% in the previous month, lending some support to the COP/USD forex pair.
Brazil’s unemployment rate declined to 5.6% in the quarter ending July, from 5.8% in the previous quarter. The figure coming in below market estimates of 5.7% sent the BRL/USD pair higher in forex trading this morning.
South Africa’s inflation rate (1200 UAE Time) and retail sales (1500 UAE Time), Eurozone’s inflation rate (1300 UAE Time), 12-month Bill auction (1410 UAE Time), 3-month Bill auction (1410 UAE Time), 6-month Bill auction (1410 UAE Time), Germany’s 30-year Bund auction (1330 UAE Time), US MBA mortgage applications (1500 UAE Time), EIA crude oil stocks change (1830 UAE Time), EIA gasoline stocks change (1830 UAE Time), EIA Cushing crude oil stocks change (1830 UAE Time), EIA distillate stocks change (1830 UAE Time), EIA heating oil stocks change (1830 UAE Time), 17-week Bill auction (1930 UAE Time), India’s M3 money supply (1530 UAE Time), Canada’s foreign securities purchases (1630 UAE Time) and Bank of Canada interest rate decision (1745 UAE Time), Russia’s PPI (2000 UAE Time), as well as Argentina’s GDP growth rate (2300 UAE Time).
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