News of the week summary - 28/09/2025
Washington steps in to shore up Argentina’s Peso
Argentina’s president Javier Milei, facing mounting political and economic pressures, has secured a pledge of support from the United States. Treasury Secretary Scott Bessent announced that Washington is negotiating a $20 billion currency swap line with Argentina’s central bank and stands ready to purchase Argentine dollar-denominated bonds if market conditions deteriorate further.
A swap line is essentially a credit facility: the U.S. would provide dollars to Argentina’s central bank in exchange for pesos, helping the country defend its currency when investors are pulling money out. This tool has been used before, notably during Mexico’s 1995 financial crisis, to prevent a sudden collapse of confidence and stabilize markets.
Milei, a libertarian who campaigned on radical economic reforms, is now battling the toughest crisis of his presidency. Inflation has been brought down from the brink of hyperinflation, but growth has stalled and political setbacks (including an election defeat in Buenos Aires province and a corruption scandal) have triggered a rush out of the peso. Investors feared this might force a disorderly devaluation, a sharp drop in the currency’s official value that would worsen inflation and erode savings.
The U.S. intervention has already had a stabilizing effect. Argentina’s peso has rebounded 10% from last week’s lows, while bond prices and equities have also recovered. The move signals strong political support from Washington for Milei, who remains the only major Latin American leader openly aligned with former U.S. president Donald Trump.
Still, analysts warn that emergency financing only buys time. Argentina also holds an $18 billion swap line with China’s central bank, though most of it is inactive. Some expect the U.S. may require Argentina to reduce its reliance on China as a condition for fresh support. Ultimately, as one strategist noted, this week’s U.S. backing may calm markets in the short run, but lasting stability will depend on Milei’s ability to push through deeper political and economic reforms.
Ukrainian drone strikes hit Russia’s oil exports
Ukraine’s intensified campaign of drone attacks on Russian oil refineries is starting to bite into one of the Kremlin’s most important revenue streams: fuel exports. Since August, 16 out of Russia’s 38 refineries have been hit, including the Ryazan facility near Moscow, one of the country’s largest plants. Altogether, more than one million barrels per day of refining capacity has been disrupted, according to industry analysts.
The impact is showing in diesel exports, a key Russian product. Russia is the world’s second-largest diesel exporter, and shipments this month are set to fall to their lowest level since 2020. While Europe no longer buys Russian diesel directly, Turkey remains a major customer, receiving about half of the cargoes. With Russian supply down, Turkey has had to source fuel from India and Saudi Arabia, while prices have jumped: diesel now trades at a premium of $25–30 a barrel over Brent crude, the highest level since midsummer.
This market reaction reflects the mechanics of global oil supply. When refineries shut down, there’s a lag before reduced output shows up at ports and in export data. But the scale of disruption is large enough that the effect is now being felt internationally, raising fuel costs for importers.
For Ukraine, this campaign is both strategic and symbolic. By striking energy infrastructure hundreds of kilometers inside Russian territory, Kyiv is demonstrating its ability to disrupt Russia’s war machine. Diesel is particularly important: it powers agricultural machinery but also tanks and parts of the Russian military’s logistics. Ukrainian president Volodymyr Zelenskyy has emphasized that the most effective “sanctions” are not diplomatic measures but physical damage to oil refineries, depots, and terminals.
So far, Russia has avoided domestic shortages, since its diesel production capacity exceeds internal demand by more than 50%. Petrol, however, is tighter, leading to some strains in non-military sectors. Still, the longer Ukraine sustains these strikes and ramps up drone production as planned, the more pressure it could put on Russia’s export revenues and on global fuel markets.
Germany lifts Eurozone growth as France struggles
Business activity in the euro area expanded in September at its fastest pace in more than a year, thanks largely to a rebound in Germany that offset persistent weakness in France. The flash eurozone Purchasing Managers’ Index (PMI) (a key survey tracking private sector activity) rose slightly to 51.2 from 51 in August, marking the highest reading in 16 months and staying above the 50 threshold that separates growth from contraction.
Germany was the engine of this improvement, with output rising at one of the strongest rates since spring 2023. The recovery there was led by services, suggesting that consumer demand and domestic activity are providing some relief after months of industrial stagnation. France, by contrast, contracted sharply: activity declined for the 13th straight month, dragged down by political uncertainty and weak demand.
The PMI is widely followed because it captures real-time shifts in business conditions, often ahead of official GDP figures. A reading just above 50 signals that the eurozone economy is expanding, but only modestly. Analysts noted that while the region is technically on a growth path, momentum remains fragile. In Germany, the survey hinted at slowing new orders despite the rebound in services, while in France, companies reported falling workloads, weaker hiring, and little sign of improvement as political deadlock continues.
France’s troubles are closely tied to its fiscal tensions. President Emmanuel Macron recently replaced his prime minister after parliament rejected a budget plan aimed at reducing the deficit through tax increases and spending cuts worth €44 billion. This uncertainty has weighed on confidence, exacerbating the downturn in business activity.
For policymakers at the European Central Bank, the data confirm that the bloc is avoiding recession but remains far from achieving a robust recovery.
Powell cautions markets on rate-cut expectations
Federal Reserve chair Jay Powell has warned investors not to assume that further interest rate cuts this year are guaranteed, stressing the delicate balance the central bank faces between curbing inflation and protecting jobs. Speaking in Rhode Island, Powell described the Fed’s task as a “challenging situation”: cut too aggressively, and inflation may flare back up; keep rates too high for too long, and the labor market could weaken unnecessarily.
Last week, the Fed lowered its benchmark interest rate by a quarter-point to 4.0–4.25%, its first cut since December. The move followed signs of cooling in the labor market and only modest inflationary pressures from tariffs. Many market participants expect two more cuts by year-end, but Powell pushed back, warning that premature easing could force the Fed to reverse course if inflation fails to return to its 2% target.
Inflation has been running above that target since 2021 and may rise further as President Donald Trump’s new tariffs lift consumer prices. Powell also challenged the administration’s claim that foreign exporters are absorbing most of the tariffs. Instead, he said U.S. businesses (retailers and importers) are bearing the bulk of the costs, though they have not yet fully passed them on to consumers.
The Fed’s cautious stance comes amid political pressure. Trump has repeatedly attacked Powell for not cutting rates more quickly, underscoring the tension between the White House and the central bank.
Meanwhile, the OECD released updated forecasts suggesting the Fed could still deliver up to three more cuts over the coming months. The organization expects U.S. growth to slow from 2.8% in 2024 to 1.8% this year and 1.5% by 2026, as higher tariffs weigh on economic momentum. Even so, the U.S. is projected to outperform other G7 economies this year, with the UK in second place at 1.4% growth, while Germany, France, and Italy will expand by less than 1%.
For financial markets, the takeaway is clear: rate cuts are possible, but not guaranteed. The Fed will remain data-dependent, weighing the twin risks of stubborn inflation and a weakening jobs market before moving further.