German Economic Setback, U.N. Speeches, and Parsing U.S. Monetary Policy – Currency Thoughts
German Economic Setback, U.N. Speeches, and Parsing U.S. Monetary Policy
September 24, 2025
The dollar got an across-the-board lift from a disappointing German business climate survey result in September. That monthly report from the IFO Institute in Munich yielded an unexpected 4-month low reading of 87.7 after August’s 15-month high and in contrast to analyst expectations of a third straight rise. Commenting on the survey results, IFO President Clemens Fuest said, “companies were less satisfied with current business, while their expectations clouded noticeably. Prospects for an economic recovery have suffered a setback.” Sub-indices dropped to a 6-month low for current conditions and a 4-month low in forward-looking expectations. On a sectoral breakdown, services, trade and manufacturing fell to 7-, 5- and 3-month lows. Only in construction was September’s reading above August’s, but such was still well under zero at a 2-month high of -14.6.
Overnight dollar advances amounted to 0.5% against the euro and Swiss franc but also the Japanese yen. Japan’s composite purchasing managers index for September, announced a day late because of yesterday’s Autumnal Equinox holiday, dropped 1.3 index points to a 6-month low of 48.4, led by manufacturing (also a 6-month low of 48.4). The services PMI of 53.0 was at a 3-month low.
The dollar also rose 0.4% against the Korean won and sterling and 0.3% versus the Canadian and New Zealand dollars. The won weakened through the 1400 per dollar level for the first time in five weeks. Bank of England Monetary Policy Committee member Greene expressed concern about more elevated price pressures. A Swede, Anna Bremen, has been appointed the new governor of the Reserve Bank of New Zealand.
Addressing the U.N. General Assembly, U.S. President Trump unveiled a notable shift on his view of the Russia-Ukraine war. In a stark contrast from his blunt appraisal back in February that Ukraine President Zelensky “held no cards,” he now revealed a fresh belief that Ukraine might eventually all of its previous territory and suggested that sanctions against Russia could be expanded.
The main U.S. focus of financial markets around the world continues to be on Fed monetary policy. Speaking yesterday, Chairman Jerome Powell painted a nuanced picture, with the central bank’s dual mandates currently signaling diverse policy directions and underscoring a need for officials to tread cautiously through that landscape. Markets today are positioned for small rate cuts at next quarter’s two scheduled policy reviews, which is aligned with the signal sent right after the last FOMC meeting earlier this month.
In other financial market action this Wednesday, ten-year sovereign debt yields edged a basis point higher in the United States, held steady in Germany, France and Spain, and dipped by a basis point in Japan and Great Britain. The prices of WTI oil and Bitcoin have strengthened 1.1% and 0.8% so far today, while gold has softened by 0.3%. Stock markets in the Pacific Rim rose 1.4% in Hong Kong, 0.8% in China and 0.3% in Japan but fell 0.9% in Australia, 0.8% in Singapore and 0.5% in India. Share price movements thus far in Europe and prior to the open in U.S. futures trading have been unremarkable.
Investor sentiment toward Switzerland continues to be gloomy in the face of the 39% U.S. import tariff against Swiss goods. The September confidence reading remained quite weak in September at -46.4 but not as much so as August’s 35-month low of -53.8.
Business confidence among Turkish manufacturers posted its fifth straight similar reading in September. The index since May ahas ranged from a high of 101.4 to a low of 100.2, which was the observation both this month and in July.
Czech business sentiment edged up 0.1 point to a 38-month high, and consumer confidence climbed 4.5 points to a 2-month high.
Business confidence in Denmark fell to a 1-year low in September, while that in Sweden matched August’s 6-month high. Danish monetary officials unveiled new forecasts, calling for softer GDP growth in 2025-27 than imagined previously.
The 12-month change in Spanish producer prices, minus 1.5%, was its most negative in ten months during August due to a 4.5% slump in the energy component. Finnish producer price inflation, which had been negative from April 2023 to June 2024, again from August 2024 through December 2024 and also April to July of this year, rose to a 5-month high of +0.1% in August.
Officials at the Central Bank of Sri Lanka left their policy interest rate unchanged a 7.75% as expected. This year there has been just a single 25-basis point rate cut done in May. That followed 650 basis point points of easing in the final 7 months of 2023 and an additional 100 basis points worth in 2024. CPI inflation, which is targeted at 5%, had imploded previously to -4.2% by February 2025 but recovered to 1.2% by last month. Officials project a return to target around the middle of 2026, according to a released statement.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Sri Lanka, German IFO Business climate index, Trump and Powell
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