Economic Outlook for Vietnam: Interest Rates and Exchange Rates Under Pressure

Economic

Forex

Summary:

Vietnam's economy faces rising challenges as the credit growth remains high, and the exchange rate pressures persist, which are expected to push interest rates upward by the end of 2025..

Vietnam’s Economic Pressures: Rising Credit, Exchange Rate, and Interest Rates

As of late August 2025, Vietnam’s credit growth has been strong, reaching 17.14 trillion VND (about 17.14 million VND), reflecting an 11.08% increase from the previous year. With expectations for credit growth to reach 20.19% this year, it remains one of the highest growth rates in recent years, exceeding the average of 14.5%.

While the average interest rate for new loans stands at 6.38%, nearly 0.6% lower than the previous year, the rising credit and exchange rate pressures are expected to influence interest rate trends toward the end of the year.

Exchange Rate and Currency Demand Concerns

In August 2025, the exchange rate of the Vietnamese đồng came under pressure, resulting in a shift towards foreign currency due to lower interest rates in Vietnamese đồng. The demand for foreign exchange is expected to rise due to the delayed disbursement of foreign loans and the increase in foreign debt obligations.

Despite expectations that the U.S. Federal Reserve might reduce interest rates by the end of the year, local challenges, including higher import demand as tariffs on goods from the U.S. have been reduced, are expected to keep the exchange rate "hot," putting pressure on the local currency.

Rate Predictions and Economic Impact

The market expects the exchange rate to range between 26,600 and 26,750 VND/USD by the end of 2025, reflecting a 4.5% to 5% increase compared to earlier in the year. The country’s credit growth continues to outpace capital mobilization growth, which adds further pressure on interest rates, particularly for private commercial banks competing for deposits.

By the end of July 2025, 12-month deposit rates for private commercial banks had risen slightly to 4.89%, a 2 basis point increase compared to the previous month. In contrast, the state-owned commercial banks have maintained a stable rate of 4.7%.

Policy Measures and Future Adjustments

The State Bank of Vietnam (SBV) has consistently emphasized stabilizing both interest rates and exchange rates, alongside efforts to manage inflation. To this end, the SBV is encouraging a more flexible and efficient monetary policy to balance interest rates and currency exchange, while maintaining control over the foreign exchange market.

In the upcoming period, the SBV will also focus on improving the efficiency of credit programs aimed at supporting housing, infrastructure, and digital technology development. These efforts aim to keep inflation in check and ensure stable growth while accommodating the country’s growing credit needs.

Vietnam’s economic strategy for the remainder of 2025 involves managing a delicate balance between stimulating growth and addressing inflationary pressures. High credit growth, exchange rate concerns, and increased tariffs could push interest rates higher, but with the SBV’s targeted policy measures, the country aims to stabilize its economy while managing external challenges.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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FXOpen

Economic

Stocks

Today at 15:30 GMT+3, the Consumer Price Index (CPI) report will be released.

In anticipation of the figures, traders remain optimistic – the S&P 500 index (US SPX 500 mini on FXOpen) reached a new all-time high yesterday, climbing above 6,560 points.

The bullish sentiment is driven by:
→ Expectations of an interest rate cut in September, which is believed to provide a positive boost to the US economy (and increase corporate profits).
→ A sharp rally in Oracle (ORCL) shares. The company announced it had signed four multibillion-dollar contracts with three different clients.

Technical Analysis of the S&P 500

On the 4-hour chart of the S&P 500 index (US SPX 500 mini on FXOpen), the price continues to move within an ascending channel, shown in blue.

From a bearish perspective:
→ the price is near the upper boundary of the channel, which has acted as resistance for several weeks;
→ the RSI indicator is close to the overbought zone, which may discourage buyers from entering at higher prices;
→ yesterday’s candle had a long upper shadow (marked with an arrow), indicating increased selling pressure.

From a bullish perspective:
→ the local level of 6,520, after being broken, has switched from resistance to support;
→ in September, the price has followed a steep upward trajectory (marked with orange lines), with the lower line showing signs of support.

Taking this into account, we could assume that the market is in a short-term state of balance while awaiting the release of inflation data – arguably the key event of the week in the economic calendar.

Favourable figures could encourage the bulls to attempt a breakout above the upper boundary of the channel, lifting the S&P 500 to a new all-time high. Be prepared for spikes in volatility.

Source: FXOpen

To stay updated on all economic events of today, please check out our Economic calendar

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Gerik

Economic

Germany's Export Struggles Amid U.S. Tariffs

Germany's exports to the United States in July 2025 fell to €11.1 billion (around $13 billion), a decline of 7.9% compared to June 2025. This marks the fourth consecutive month of decline, signaling a sustained negative trend in trade with the U.S., which remains Germany's largest export market despite the setbacks. These figures represent the lowest monthly exports to the U.S. since 2021, a period that coincides with the imposition of tariffs by the U.S. under former President Trump's administration.

The tariff policy, which has targeted various goods, has dealt a heavy blow to Germany’s economy, which is heavily reliant on exports. With the trade war between the U.S. and Europe intensifying, Germany's exporters are grappling with rising energy costs and weakening demand.

Trade Balance and Economic Outlook

In addition to the decline in exports, Germany's overall trade figures showed a slight decrease in imports, down 0.1% from the previous month to €115.4 billion, leaving a trade surplus of €14.7 billion. However, the reduction in the trade surplus highlights the challenges facing Germany's export-oriented economy. The broader economy has also been affected, with concerns growing about a slowdown in industrial production and further erosion of economic confidence.

The Sentix Investor Confidence Index for the Eurozone, which reflects investor sentiment, revealed a drop to its lowest level since April 2025. In particular, Germany's index saw the steepest decline, highlighting investor concerns about the economic outlook amidst the ongoing trade tensions and uncertainty.

Challenges for German Industry

In addition to tariffs, Germany's large manufacturers are dealing with escalating energy costs, which have further strained their ability to maintain profitability. The global demand for German goods is weakening, and the cumulative effects of these economic pressures are weighing on investor sentiment. Despite these challenges, Germany continues to focus on maintaining its position as a key player in the global export market, although it faces increasing competition from other global economic centers.

In conclusion, the long-term impact of U.S. tariffs on German exports could have significant repercussions for the country's economic growth, especially as the country strives to recover from recent challenges.

Source: Sohu

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Gerik

Economic

Market Activity and Treasury Yield Movements

U.S. Treasury yields saw a modest increase on Thursday, as the market prepares for the release of the August CPI report, which is expected to show a rise of 0.3% month-over-month and 2.9% year-over-year. The 10-year Treasury yield climbed by 2 basis points to 4.057%, while the 30-year yield increased by 3 basis points to 4.705%. The 2-year yield also gained 2 basis points, hitting 3.554%.

The upcoming CPI report is highly anticipated by investors, especially in light of the recent producer price index (PPI) data, which showed a surprise 0.1% month-over-month decline. This has further solidified market expectations that the Federal Reserve will cut interest rates during its meeting on September 17. According to the CME Group’s FedWatch tool, there is a 90% probability of a 25 basis point cut, with a 10% chance of a larger half-point reduction.

The CPI data will help investors assess whether inflationary pressures are easing, particularly as the economy shows signs of weakening, including a softening job market. This data is pivotal for determining the Fed’s path forward in its ongoing effort to balance inflation control with economic growth.

Bond Market Dynamics

The bond market experienced slight volatility, with Treasury yields moving higher in anticipation of inflation data. On Wednesday, the 10-year Treasury note auction saw strong demand, which caused yields to ease temporarily. However, the rise in yields on Thursday signals that market participants are bracing for the upcoming inflation report, which could influence expectations for future Fed policy decisions.

In conclusion, the market is closely monitoring inflation data and the Fed's potential rate cuts, as these factors will guide future economic and monetary policy decisions.

Source: CNBC

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Gerik

Economic

Inflation Trends and Rate Cut Expectations

The U.S. Consumer Price Index (CPI) report for August, due on Thursday, is expected to show inflation remains persistent, with headline prices likely rising 2.9% year-over-year, up from 2.7% in July. On a monthly basis, economists predict a 0.3% increase, slightly firmer than July's 0.2% gain. The core CPI, which excludes volatile food and energy prices, is expected to stay at 3.1% annually, with a 0.3% month-over-month rise, matching the previous month's increase.

This data comes as the Federal Reserve is actively debating its next interest rate move. Markets are pricing in a 90% chance of a 25 basis point rate cut at the Fed’s upcoming policy meeting, with some increasing expectations of a more significant half-point reduction following the release of weaker-than-expected jobs data and the producer price index (PPI) report earlier this week.

Tariff Impact and Softening Demand

The rise in inflation, particularly in goods like coffee and beef, is partly driven by the ongoing effects of President Trump’s tariffs. Despite this, analysts suggest that the full impact of tariffs on inflation has been relatively modest, with businesses absorbing some costs. The latest PPI report showed a slight decline in producer prices, which may indicate weakening demand and further suggest that inflationary pressures could ease.

Economists from Wells Fargo and Goldman Sachs suggest that while tariff-related inflation is likely to continue in the short term, the broader trend in inflation is shifting downwards. This could support the case for the Fed’s rate-cutting cycle, especially if inflationary pressures remain concentrated in goods rather than services.

Market Reactions and Future Projections

Although the CPI data for August may show persistent inflationary pressures, the Fed is expected to move forward with rate cuts, with economists predicting that underlying inflation trends, particularly in housing and labor markets, will continue to ease in the months ahead. This would provide further support for the Fed's decision to adjust interest rates in the coming months, despite the challenges posed by tariffs.

In conclusion, while inflation remains sticky, with tariffs continuing to have an impact, the broader market conditions suggest that the Fed is on track for its much-anticipated rate cuts, with a focus on balancing inflation control and economic growth.

Source: Yahoo Finance

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Gerik

Economic

Trump's Push for Tariffs on India and China

In a move that has drawn criticism from both sides of the Atlantic, U.S. President Donald Trump has urged the European Union to impose tariffs of up to 100% on China and India in response to their continued purchases of Russian oil. The proposal, reportedly made during a meeting with U.S. and EU officials in Washington, aims to intensify the pressure on Moscow over its ongoing war in Ukraine. According to sources, the U.S. has also indicated it is willing to mirror any such tariffs imposed by Europe, although the White House has yet to officially comment.

The European Commission, while not disclosing details of the meeting, has reaffirmed its ongoing efforts to target Russian sanctions circumvention through third countries, but it is highly unlikely that the EU will agree to Trump's request. EU officials are concerned that such a move could jeopardize their diplomatic relations with both China and India, two key economic partners, and risk complicating their already strained ties with Russia.

Geopolitical and Trade Complications

The timing of Trump's request has raised eyebrows, particularly given the U.S.’s ongoing trade talks with India. Just two weeks ago, Trump and Indian Prime Minister Narendra Modi held a summit to discuss economic and security issues, and the proposed tariffs on India’s Russian oil purchases would add a layer of complexity to these discussions. As India already faces a 50% tariff on certain products due to its trade relations with Russia, the new tariff proposal may provoke strong backlash from New Delhi.

Additionally, the U.S. has historically been wary of relying too heavily on tariffs as a tool of diplomacy. Bill Blain, market strategist at Wind Shift Capital, noted that the EU typically prefers diplomatic engagement over outright trade conflict, and imposing tariffs would undermine the EU’s long-standing approach to global trade relations.

The EU’s Dilemma: Balancing Sanctions and Trade

Despite the political pressures, the EU's trade relationship with Russia remains complex. While the bloc has reduced its dependence on Russian energy, it still maintains significant trade in goods such as fuel and mining products. In 2024, EU imports from Russia amounted to €35.9 billion, with much of it composed of energy resources, even though the share of Russian gas in total EU imports has been steadily decreasing.

The EU’s ongoing dependency on Russian energy means that pushing back against countries like China and India for their continued trade with Moscow could be seen as hypocritical. Given the complexities of the EU's trade relationship with Russia and its need to secure alternative energy sources, many analysts doubt that Europe would risk alienating India and China over oil trade with Russia.

Looking Ahead: Potential for Further Tensions

As the geopolitical landscape evolves, the call for tariffs could lead to a test of the U.S.-EU relationship, especially as Europe seeks to balance its economic interests with diplomatic ties. Despite the challenges, Trump’s move to impose tariffs could be part of a broader strategy to shift the economic burden of sanctioning Russia to Europe, leaving Washington with fewer diplomatic costs.

The outcome of this diplomatic standoff will depend on the ability of U.S. and EU leaders to navigate their competing economic interests, and how both sides manage their dealings with Russia, China, and India in the coming months.

Source: CNBC

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Glendon

Economic

Commodity

Gold edged lower on Thursday, but held near record-highs well above the $3,600 mark, as a modest recovery in the dollar and profit-taking pressured prices, while investors waited for U.S. consumer inflation figures due later today.

Spot goldwas down 0.3% at $3,629.23 per ounce, as of 0811 GMT. Bullion hit a record high of $3,673.95 on Tuesday. U.S. gold futuresfor December delivery fell 0.4% to $3,666.70.

The U.S. dollar indexrose 0.2% to a near one-week high against rivals, making greenback-priced gold more expensive for overseas buyers.

"Gold seems to be slightly pressured by a stabilizing dollar and profit-taking today. Nevertheless, the precious metal remains firmly bullish above the psychological $3,600 level with yesterday's surprise drop in U.S. producer prices limiting the downside," said Lukman Otunuga, senior research analyst at FXTM.

U.S. producer prices unexpectedly fell in August due to lower trade services margins and modest increases in goods costs, data released on Thursday showed.

Weaker-than-expected nonfarm payroll data last week, along with revised estimates revealing 911,000 fewer jobs in the 12 months through March, have reinforced expectations of monetary easing.

Investors now await weekly jobless claims and U.S. CPI data, due at 1230 GMT. A Reuters poll forecasts a 0.3% monthly increase in August consumer prices and an increase in CPI of 2.9% year-on-year, compared with 2.7% in July.

"Signs of rising inflationary pressures may hit bets around the Fed cutting interest rates in October. This could trigger a selloff that may drag gold back toward $3,500. However, a soft CPI print may push gold toward fresh all-time highs," Otunuga added.

The Fed is widely anticipated to cut interest rates by 25 basis points at its meeting next Wednesday, while investors also priced in an 8% chance of 50-basis-point reduction, according to CME FedWatch.

Lower interest rates typically support non-yielding gold.

Elsewhere, spot silverwas down 0.2% at $41.05 per ounce. Platinumfell 0.6% to $1,377.37 and palladiumlost 0.1% to $1,172.45.