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Friday, September 26, 2025
What’s happening: The US dollar rose against the major currencies on Thursday as investors monitored the latest economic reports.
What happened: The greenback jumped to its strongest level since August 1 versus the Japanese yen after economic data sparked speculations of limited interest rate cuts by the Federal Reserve.
The EUR/USD forex pair tumbled to over two-week lows during the session.
Why it matters: The Commerce Department reported that US gross domestic product expanded by 3.8% in the second quarter, more than the initial reading of 3.3%. However, markets had expected the GDP growth rate to be revised higher.
Initial jobless claims declined by 14,000 to 218,000 in the latest week. The figure was much better than market expectations of 235,000. US trade deficit in goods also shrank by $17.3 billion to $85.5 billion in August and came in better than market estimates of $95.65 billion.
The Fed had cut its benchmark interest rate last week by 25 basis points (bps). Markets had been pricing in at least two more rate cuts this year. Remarks from Fed officials, including Chairman Jerome Powell, signal that policymakers would remain cautious about further cuts.
Investors assessed comments from Fed officials on Thursday. Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, who had supported the latest interest rate cut, indicated that the economy is unlikely to need rate cuts again anytime soon.
The US dollar extended gains versus the Swiss franc on Thursday, following the GDP data and the Swiss National Bank keeping its key interest rates unchanged. The Swiss central bank also warned that Trump’s tariffs had negatively impacted Switzerland’s economic outlook for 2026.
The USD/JPY forex pair jumped around 0.6% to 149.80, hitting its highest reading since August 1. The euro dipped around 0.6% to 1.1666 versus the US dollar, falling to a more than two-week low.
The US dollar index, which measured the greenback’s performance versus a basket of major peers, added more than 0.7% to 98.55, reaching a two-week high on Thursday.
What to watch: Investors will monitor the PCE inflation data (1630 UAE Time) and Michigan consumer sentiment (1800 UAE Time) from the US today. PCE prices in the US, which rose 2.6% year-over-year in July, are expected to surge by 2.7% in August. Analysts expect the University of Michigan consumer sentiment to decline to 55.4 in September, from 58.2 in the previous month.
Markets will also remain concerns about the threat of a government shutdown in the US, as the White House scrambles for finances to fund government operations. If Congress members are unable to reach a funding agreement by Tuesday next week, the federal government will be forced to shut down on Wednesday.
Context: Equity markets in Asia traded lower this morning after US President Donald Trump announced new trade tariffs.
Details: Trump announced fresh trade tariffs on Thursday evening, including a 100% tariff on all branded and patented pharma products, which would take effect from October 1. The latest move by Trump weighed on Asian pharmaceutical exporters, as several regional firms have significant exposure to the US market. Trump added that there would be an exemption for firms building manufacturing facilities in the US.
Data released from Japan this morning showed Tokyo’s core inflation surged 2.5% year-over-year in September, unchanged from August. Although the figure was below market estimates of 2.8%, it remained above the Bank of Japan’s target of 2%.
The Asia Dow fell 0.87% to 4,983.67 this morning. Japan’s Nikkei 225 declined by 0.36% to 45,588.72, while China’s Shanghai Composite shed 0.18% to reach 3,846.33 and Hong Kong’s Hang Seng was down 0.65% to 26,312.90. India’s Sensex lost 0.34% to trade at 80,862.98.
What to watch: Markets will monitor data on industrial profits from China (0530 UAE Time), due to be released on Saturday, and Japan’s coincident index (0900 UAE Time) and leading economic index (0900 UAE Time), scheduled for Monday. Analysts expect Japan’s index of coincident economic indicators to decline to 113.3 in July, from 115.9 in the previous month, while the leading economic index is projected to rise to 105.9 in July, from 105.1 in June.
Other Markets: European indices closed lower on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.39%, 0.56%, 0.41% and 0.66%, respectively.
President Volodymyr Zelenskyy issued a warning to Russian officials to find bomb shelters, hinting at a massive strike on Moscow. The news sent the RUB/USD pair lower in forex trading this morning.
New Zealand’s ANZ-Roy Morgan Consumer Confidence Index surged to 94.6 in September, from 92.0 in August, lending support to the NZD/USD forex pair.
The Bank of Mexico lowered its benchmark interest rate by 25 bps to 7.5%, which sent the MXN/USD pair slightly lower in forex trading this morning.
Canada’s average weekly earnings rose 3.3% year-over-year to C$1,307.86 in July. This representing a slowdown from the 3.6% reported in the previous month exerted pressure on the CAD/USD forex pair.
South Korea’s Business Survey Index for the manufacturing sector came in unchanged from the previous month at 70 in September, sending the KRW/USD pair lower in forex trading this morning.
Italy’s business confidence (1200 UAE Time), consumer confidence (1200 UAE Time), 10-year BTP auction (1310 UAE Time) and 5-year BTP auction (1310 UAE Time), France’s unemployment benefit claims (1400 UAE Time) and jobseekers total (1400 UAE Time), Brazil’s current account (1530 UAE Time) and foreign direct investment (1530 UAE Time), India’s bank loan growth (1530 UAE Time), deposit growth (1530 UAE Time) and foreign exchange reserves (1530 UAE Time), Mexico’s balance of trade (1600 UAE Time), Canada’s GDP (1630 UAE Time), wholesale sales (1630 UAE Time) and budget balance (1900 UAE Time), as well as US personal income (1630 UAE Time), personal spending (1630 UAE Time), Michigan consumer expectations (1800 UAE Time), Michigan current conditions (1800 UAE Time), Michigan inflation expectations (1800 UAE Time), Baker Hughes oil rig count (2100 UAE Time) and Baker Hughes total rigs count (2100 UAE Time).
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