The euro rose in the European market on Monday against a basket of global currencies, maintaining its gains for the second consecutive day against the US dollar, nearing a two-week high, ahead of an important meeting between US President Donald Trump and his Ukrainian counterpart Volodymyr Zelenskiy.

The odds of a European interest rate cut in September have declined, due to persistent inflationary pressures currently weighing on monetary policymakers at the European Central Bank. To reassess those odds, investors are awaiting the release of more economic data from the eurozone.

Price Overview

• Today’s euro exchange rate: the euro rose against the dollar by 0.1% to (1.1715$), from Friday’s closing price of (1.1703$), recording a low of (1.1693$).

• The euro ended Friday’s session up about 0.5% against the dollar, resuming gains that had paused the previous day amid corrections and profit-taking from the two-week high at 1.1730$.

• The euro posted a 0.55% gain against the dollar last week, marking its second consecutive weekly increase, driven by fading expectations of a European rate cut versus rising expectations of a US rate cut.

Trump – Zelenskiy Meeting

The main event for investors on Monday is a meeting between Trump and Zelenskiy, joined by some European leaders, at a time when Washington is pressuring Ukraine to accept a quick peace deal to end the bloodiest war in Europe in 80 years.

Trump is relying on Zelensky to reach a deal after his meeting with Russian President Vladimir Putin in Alaska, where he appeared more aligned with Moscow in seeking a peace agreement rather than a ceasefire first.

European Interest Rates

• Recent eurozone inflation data showed persistent pressures on monetary policymakers at the European Central Bank.

• According to some Reuters sources, a clear majority at the ECB’s latest meeting favored keeping interest rates unchanged in September, for the second consecutive meeting.

• Money market pricing for a potential 25-basis-point rate cut by the ECB in September is currently stable below 30%.

• To reassess these odds, investors in the coming period are awaiting further economic data from Europe, along with remarks from ECB officials.

The Japanese yen declined in Asian markets on Monday at the start of the week’s trading against a basket of major and minor currencies, moving into negative territory against the US dollar and retreating from its three-week high, as the Japanese government ignored US pressure on the Bank of Japan to raise interest rates.

With the odds of a 25 basis point rate hike by the Bank of Japan in September still incomplete, markets are awaiting further evidence to clarify the path of Japanese monetary policy normalization during the remainder of this year.

Price Overview

• Today’s exchange rate for the Japanese yen: the dollar rose against the yen by about 0.3% to (147.58¥), from today’s opening price of (147.15¥), recording a low of (147.08¥).

• The yen ended Friday’s session higher by about 0.45% against the dollar, marking its third gain in four days and approaching a three-week high at 146.21 yen, supported by strong data on Japanese economic growth in the second quarter of this year.

• The yen posted a 0.4% weekly gain against the dollar last week, its third weekly increase in the past month, driven by rising expectations of a US interest rate cut in September.

US Pressure

The Japanese government late last week ignored rare and direct comments from US Treasury Secretary Scott Bessent, who said the Bank of Japan is “lagging behind” in its monetary policy — remarks seemingly aimed at pressuring the central bank to raise interest rates.

Japanese Interest Rates

• The market is currently pricing in around a 40% probability that the Bank of Japan will raise interest rates by 25 basis points at its September meeting.

• To re-evaluate these odds, investors are awaiting additional data on inflation, unemployment, and wages in Japan.

• Minutes from the June monetary policy meeting showed that some Bank of Japan board members said the central bank would consider resuming interest rate hikes if trade tensions eased.

Gold prices held steady during Friday’s trading as the US dollar weakened against most major currencies and markets assessed the latest US inflation data.

Figures released today showed retail sales rising 0.5% month-on-month in July, in line with expectations, indicating resilient consumer spending in the US despite high tariffs.

A University of Michigan survey also revealed that US consumer sentiment fell to 58.6 points in August from 61.7 in July, marking its first decline in four months.

Government data yesterday showed the US producer price inflation index increasing 0.9% month-on-month in July, exceeding analysts’ forecasts of a 0.2% rise.

Similar US data earlier this week showed that the annual growth rate of the consumer price index remained steady at 2.7% in July, below expectations for an increase to 2.8%.

Core inflation — which excludes volatile food and energy prices — rose to 3.1% in July, above expectations of 3% and compared to 2.9% in June.

According to the FedWatch tool, investors now see a 99% probability of a 25 basis point interest rate cut by the Federal Reserve in September, compared to 94% yesterday and 57% a month ago.

Analysts also see a 61% chance of another 25 basis point cut in October, up from 34% a month ago, along with a 51% probability of a similar cut in December versus 25% a month ago.

Meanwhile, the US dollar index fell 0.4% to 97.8 at 20:02 GMT, after hitting a high of 98.2 and a low of 97.7.

In commodities trading, spot gold was steady in negative territory at $3,380.9 an ounce at 20:03 GMT, while US gold futures posted weekly losses of around 3%.

In the spring of 2024, the Belarusian government placed the Manalit radio components plant in the city of Vitebsk on the “Republican Honor Board” in recognition of “outstanding economic results.” This was the second year in a row the plant had received the award.

This recognition for Manalit — a Russian-owned plant located in Belarus — came at a time when it had become a critical supplier of high-reliability electronic components used in missiles, radars, and aircraft deployed by Russia in its war against Ukraine.

During the first two years of Russia’s full-scale invasion of Ukraine, which began in February 2022, Manalit’s annual profits increased nearly six-fold, driven almost entirely by military exports to Russia.

Manalit’s story mirrors that of many heavy industry plants in Belarus. Founded in the Soviet era as a major producer of ceramic capacitors, it faced a severe crisis in the 1990s with collapsing demand. By 2009, it was close to total liquidation.

In 2011, salvation and transformation came from its former competitor, the Kolon plant in St. Petersburg, Russia. Russian investors acquired a controlling 51% stake, effectively making Manalit an offshore production base for the Russian defense industry.

Capacitors Designed for War

Manalit specializes in producing ultra-durable multilayer ceramic capacitors approved for use in military and space applications.

In November 2020, plant director Alexander Shumakher told the state news agency BelTA, “Ninety-seven percent of our production serves the Russian defense industry.”

In 2024, Vitebsk regional executive committee head Alexander Subotsin stated that the plant was “operating systematically” and had achieved results over the past two years “that could not fail to please.”

These capacitors — such as the K10-84 series — are not intended for consumer electronics. They are used in missile guidance systems, radar arrays, electronic warfare units, and nuclear control systems, where failure could mean the loss of a mission or weapon.

A Sanctions Loophole

Western sanctions imposed on Russia in 2014 after the annexation of Ukraine’s Crimea cut off direct access to advanced Western electronics for military use.

Belarus, however, was not subject to these restrictions until 2022. For nearly eight years, Manalit exploited this gap, importing equipment and materials from Europe and the United States, then shipping the finished components to Russia to replace banned Western parts.

Even today, despite EU and US sanctions, Manalit can still buy production lines from Slovenia’s KEKO, equip them with Japanese Pro-face control panels (owned by France’s Schneider Electric), and continue sourcing precious metal powders from the US for capacitor manufacturing.

Evidence Among the Wreckage of War

According to a specialist from Ukraine’s Defence Intelligence Directorate (HUR), K10-84 capacitors produced by Manalit have been found in Russian Iskander ballistic missiles, Kalibr cruise missiles, air-launched Kh-101 cruise missiles, S-200 and S-300 air defense missiles, and Zoopark counter-battery radars.

“In the Kh-101 missile’s air pressure system, all capacitors and 80% of the electronic chips are made in Belarus. In 2024-model Iskander missile control units, almost every capacitor is from Manalit,” the specialist said.

Kremlin Connections

Manalit’s exports to Russia are routed through a single distributor: SpecElectronKomplekt (SpecEk), a key supplier to the Russian Ministry of Defence.

Customs data obtained by Radio Free Europe/Radio Liberty and the Belarusian Investigative Center shows that between October 2022 and March 2025, Manalit shipped $43 million worth of goods to SpecEk — 96% of them ceramic capacitors.

SpecEk is listed in Russia’s closed defense contractors registry, which includes suppliers to major Russian defense firms such as:

Rostec: an umbrella for 350 defense companies producing 40% of Russian state military orders.

Almaz-Antey: maker of S-300, S-400, Buk, and Tor air defense systems.

KRET: electronic warfare systems.

UAC: Su, MiG, and Tupolev aircraft.

Tactical Missiles Corporation: precision missiles including Kh-101.

Uralvagonzavod: main battle tank production.

Russian Helicopters: Mi-8, Ka-52, and Mi-35 attack helicopters.

War Profits and Sanctions

Before the full-scale war in 2022, Manalit’s annual profits stood at about $1.4 million. By 2024, net profit had surged to $6.2 million — growth of more than 460% in five years.

The plant recorded record profits during the bloodiest conflict in Europe since World War II.

In May 2023, Ukraine imposed sanctions on Manalit for “directly facilitating Russian military aggression.” By contrast, the EU and US have imposed no sanctions, leaving its access to Western suppliers open.

That has made Manalit effectively a “sanctions gateway” — a Belarusian legal entity transferring Western technology to the Russian military.

Since coming under Russian control in 2011, the plant has been modernized with Western equipment, maintained open access to European and US raw materials, secured Russian military certification, and supplied capacitors found in missiles that struck multiple Ukrainian cities.

As Western governments continue to debate new sanctions, capacitors made in a quiet Belarusian factory keep traveling from Vitebsk assembly lines to Russian missile plants — and finally into Ukraine’s skies.