Revised U.S. GDP, Euroland Economic Sentiment, and ECB Minutes in Today’s Headlines – Currency Thoughts
Revised U.S. GDP, Euroland Economic Sentiment, and ECB Minutes in Today’s Headlines
August 28, 2025
The dollar lost marginal ground overnight, including dips of 0.2% against the euro and yen. In contrast to one-basis point upticks in the U.S. and German ten-year sovereign debt yields, those of other key economies slipped such as 3 basis points in Italy, two bps in France and Great Britain, and one basis point in Italy and Japan. Equity markets closed up 1.1% in China, 0.7% in Japan and 0.8% in South Korea but down 1.2% in Taiwan, 0.8% in Hong Kong and 0.9% in India. Stock market changes in the U.S. and Europe have been less pronounced so far than those in Asia. Bitcoin’s price rose 1.6% overnight, and gold strengthened 0.4%.
The earliest estimate of U.S. GDP growth in 2Q had already shown a big improvement from the first quarter’s 0.5% dip to a rise of 3.0%, and that improvement was extended today to a revised 3.3% annualized increase. Among the revised figures, personal consumption (+1.6% annualized) and non-residential business investment (5.7%) do not depict an economy on the brink of recession, but pronounced swings in the growth contributions of net exports (+5.0 percentage points) and inventories (-3.5 percentage points) highlight distorting effects of big changes in U.S. import tariffs. Year-on-year changes in the personal consumption price deflator of 2.4% overall and 2.7% excluding food and energy were above the 2.0% objective. The coming two quarters will be much more revealing regarding the eventual impact of the tariffs on overall price trends.
In other U.S. economic news disclosed today, 229K of new jobless insurance claims last week approximated what analysts had been expecting, and pending home sales dropped 0.4% in July, marking their third decline in the last four reported months. Over that span, pending sales fell 5.8%, and July sales were down 2.8% compared to the July 2024 level.
In the euro area, economic sentiment unexpectedly weakened to a 2-month low in August. Sub-indices for construction, industrial activity and services posted 4-, 3- and 2-month lows, while retail was its least negative in a half year. The reading for consumer confidence, a 4-month low of -15.5, matched the preliminary estimate. Expected consumer price inflation ticked up to a 4-month high, but selling price expectations were at a 2-month low. Employment expectations improved slightly.
Minutes from the European Central Bank Governing Council’s July policy review attested to a diversity of opinions over how higher tariffs will affect inflation and economic growth later this year and in 2026. Accordingly, opinion was not unified over the appropriate future path of interest rates.
In the Philippines where on-year CPI inflation in July printed at a 69-month low of 0.9%, officials at Bangko Sentral ng Pilipinas cut their key interest rate by another 25 percentage points to a 33-month low of 5.0%. This expected move brings cumulative rate reduction over the past year to 150 basis points. Filipino inflation crested at 8.7% in January 2023. The current price pace is below the central bank’s medium-term target range of 2-4%, but officials don’t expect it to remain so. “The outlook for inflation is broadly unchanged. The inflation forecast for 2025 settled at 1.7 percent. The forecasts stand at 3.3 percent for 2026 and at 3.4 percent for 2027.” Officials continue to monitor the effect of U.S. trade and investment policies very carefully.
Swiss and Czech 2Q GDP data released today mirror one another. Compared to the first quarter, GDP rose 0.1% in Switzerland and 0.2% in the Czech Republic. Both increases were well below first-quarter growth and less than analysts had been projecting. On-year growth was 1.2% in Switzerland and 2.4% in the Czech Republic.
Russian officials revised down projected GDP growth this year by a percentage point to 1.5%. GDP had expanded slightly more than 4.0% in both 2023 and 2024, but military conscription and elevated interest rates to fight inflation are taking a toll now.
Indian industrial production exceeded expectations in July with an on-year advance of 3.5% after gains of 1.9% in May and 1.5% in June.
Portuguese and Italian consumer sentiment became slightly more pessimistic in August. But in Swed, consumer confidence improved to a 6-month high.
Sentiment among Italian manufacturers slid 0.4 index points below July’s 14-month high this month, and Spain’s business confidence index fell to a 10-month low. The RBNZ index of business sentiment in New Zealand climbed 2.1 points to a 5-month high of 49.7 in August.
South African producer price inflation more than doubled to an 11-month high of 1.5% in July.
Belgian consumer price inflation of 1.9% this month matched July’s 18-month low. Icelandic CPI inflation of 3.8% in August matched the cyclical lows hit previously in March and May. When first touched in March, it was at a 51-month low.
Canada’s current account deficit soared to a record high last quarter of C$ 21.2 billion, which was greater than the calendar year shortfalls of C$ 15.6 billion in 2024 and C$ 18.4 billion in 2023.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: ECB minutes, Euroland economic sentiment, U.S. revised 2Q GDP growth
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