The euro declined in the European market on Tuesday against a basket of global currencies, to extend its losses for the second consecutive day against the US dollar, under negative pressure from the rise in US Treasury yields, which supports the rise of US currency levels in the foreign exchange market.

The likelihood of a European interest rate cut in September declined, due to the entrenched inflationary pressures currently facing monetary policymakers at the European Central Bank, and in order to reprice those expectations, investors later this week await comments from ECB President Christine Lagarde at the annual Jackson Hole Economic Symposium.

Price Overview

• Today’s euro exchange rate: The euro fell against the dollar by 0.2% to ($1.1639), from the opening price of ($1.1661), and recorded the highest level at ($1.1675).

• The euro ended Monday’s trading down by 0.35% against the dollar, marking its second daily loss in the last three days, due to the decline in expectations of a US interest rate cut.

US Dollar

The dollar index rose on Tuesday by 0.2%, maintaining its gains for the second consecutive session, reflecting the continued rise of the US currency levels against a basket of major and minor currencies.

This rise is supported by the current increase in the yield on 10-year US Treasury bonds, as strong data on producer prices and retail sales in the United States reduced the likelihood of a Federal Reserve interest rate cut in September.

In order to reprice those expectations, markets this week are awaiting comments from Federal Reserve Chairman Jerome Powell at the annual Jackson Hole Economic Symposium.

European Interest Rates

• The latest inflation data in the euro area showed the persistence of entrenched inflationary pressures on the European Central Bank’s monetary policymakers.

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

• The money market’s pricing of the likelihood that the European Central Bank will cut European interest rates by about 25 basis points in September is currently stable below 30%.

• And in order to reprice those expectations, investors are awaiting comments from European Central Bank President Christine Lagarde at the Jackson Hole Symposium.

The Japanese yen declined in Asian markets on Tuesday against a basket of major and minor currencies, deepening its losses for the second consecutive day against the US dollar, hitting a two-week low amid the continued rise in US 10-year Treasury yields.

With current weak expectations for the Bank of Japan to raise interest rates by 25 basis points in September, the market is awaiting further evidence on the path of Japanese monetary policy normalization during the remainder of the year.

Price Overview

• USD/JPY today: the dollar rose about 0.2% against the yen to ¥148.12, the highest in a week, from the opening level of ¥147.86, after hitting a low of ¥147.62.

• The yen ended Monday’s session down 0.5% against the dollar, its biggest daily loss since July 31, amid recent developments in the US bond market.

US Treasury Yields

The 10-year US Treasury yield rose by about 0.25% on Tuesday, extending gains for the fourth consecutive session, nearing a three-week high at 4.353%, which supports further investment in the US dollar.

These developments in the bond market came after strong US producer price and retail sales data, reducing the likelihood of a Federal Reserve interest rate cut in September.

To reassess these expectations, markets this week are awaiting remarks by Federal Reserve Chairman Jerome Powell at the annual Jackson Hole Economic Symposium.

Japanese Interest Rates

• Current pricing of the probability for the Bank of Japan to raise rates by 25 basis points at the September meeting stands around 40%.

• To reprice these odds, investors await more data on inflation, unemployment, and wage levels in Japan.

• Bank of Japan Governor Kazuo Ueda is scheduled to speak at the Jackson Hole Symposium, and his remarks are expected to provide further evidence on the course of Japan’s monetary policy normalization this year.

Oil prices rose on Monday as investors monitored the US-European summit focused on ending the war between Russia and Ukraine.

Markets are closely watching the meeting between US President Donald Trump and Ukrainian President Volodymyr Zelensky on halting the war with Russia.

The world is also awaiting further meetings between Trump and European leaders to discuss ways to end the Russia-Ukraine conflict.

Meanwhile, Russian oil supplies through the Druzhba pipeline to Hungary and Slovakia were halted after part of the network came under a Ukrainian attack.

On the trading front, Brent crude futures for October delivery rose 1.1% or 75 cents to settle at $66.60 a barrel.

US Nymex crude futures for September delivery increased 1% or 62 cents to close at $63.42 a barrel.

In a surprising development, Argentina, the second-largest economy in South America, has recently emerged as the continent’s third-largest oil producer. The boom in unconventional hydrocarbons production from the Vaca Muerta formation—one of the world’s five largest shale reserves—is driving significant growth in oil and natural gas output. State-owned energy company YPF is leading the development of this shale field, transforming into one of the most efficiently managed state-run energy firms in Latin America. Despite being nationalized in April 2012, YPF’s hydrocarbon production has continued to rise while operating costs declined, sharply boosting both its profits and profitability.

Following former president Cristina Fernández de Kirchner’s forced takeover of a 51% stake in YPF from Spanish energy giant Repsol in 2012, the company’s shares collapsed, losing three-quarters of their value as investor confidence was severely damaged. At the time, concerns mounted that Argentina’s financial and economic troubles could weigh heavily on the company. Surprisingly, that scenario did not materialize. Instead, YPF took the lead in developing the Vaca Muerta field, which covers 8.6 million acres. Although discovered in 1927, it was not fully assessed until 2011.

One of the main reasons for the delay in developing the formation was Repsol’s reluctance to commit major investments to exploration in Argentina, due to strict regulations that heavily squeezed profitability. Against this backdrop, the government decided to nationalize YPF to address its energy shortfall and reduce the country’s large trade deficit.

Buenos Aires has long seen Vaca Muerta’s reserves as a strategic opportunity to revive its struggling economy. The formation is estimated to hold about 16 billion barrels of recoverable shale oil and 308 trillion cubic feet of natural gas, making it the world’s second-largest shale gas resource and fourth-largest shale oil resource. It is also the largest unconventional hydrocarbons reservoir in South America.

At first, Vaca Muerta was compared with the US Eagle Ford formation. But extensive development proved it rivals the best shale plays globally, with analysts even likening it to the US Permian Basin, America’s largest oil field producing around six million barrels per day. Industry experts highlight Vaca Muerta’s high reservoir pressure and superior rock thickness, qualities that make it even more attractive than many US formations.

According to Argentina’s Ministry of Economy, Vaca Muerta is the largest shale-producing area in South America and one of the leading unconventional reserves worldwide. In the first half of 2025, it produced an average of 449,299 barrels per day of shale oil and 2.8 billion cubic feet per day of shale gas. These volumes alone—excluding conventional output—surpass the oil production of many South American countries.

YPF benefited early by securing the best assets in Vaca Muerta at a time when private firms remained cautious over expropriation risks and economic volatility. As a result, the national company today is the leading oil and gas producer in the formation.

Official data shows that in the first half of 2025, YPF produced 243,183 barrels per day of shale oil and 695 million cubic feet per day of shale gas, up 18% and 7% year-on-year respectively. Total production reached 343,228 barrels per day of crude oil (71% from shale) and 904 million cubic feet per day of natural gas (77% from shale). This means YPF accounts for 46% of Argentina’s oil production and 29% of its natural gas.

By 2024, YPF had proven reserves of 1.1 billion barrels of hydrocarbons, with shale oil representing 78% (854 million barrels). The reserves were divided into 56% crude oil, 44% natural gas, and 6% natural gas liquids, with an overall reserve life of 5.6 years. Vaca Muerta reserves alone are expected to last 8.3 years. The company’s proven reserves grew 19% over the past five years, with shale oil reserves nearly doubling since 2020. YPF plans to invest $5 billion in 2025, including $3.6 billion for exploration and production, mostly in Vaca Muerta, as part of a $36 billion five-year plan beginning in 2025, with about 80% allocated to exploration and production. The company also intends to divest stakes in 16 conventional oil concessions to focus on developing the shale formation.

What makes Vaca Muerta attractive to companies is its low breakeven price of $36 per barrel, far below production costs at Argentina’s conventional fields ($55–75 per barrel). YPF’s total lifting cost in Q2 2025 stood at $15.30 per barrel, but only $4.60 for its Vaca Muerta operations. The company expects this to fall to $5 per barrel by 2027 as it transitions to almost entirely shale-based production. CEO Horacio Marín stated that the company’s Vaca Muerta operations are profitable at Brent crude prices of $40 per barrel.

YPF projects production to reach 2.1 million barrels of oil equivalent per day by 2030, including 820,000 barrels of oil, 1.1 million barrels of oil equivalent of natural gas, and 170,000 barrels per day of natural gas liquids. Around 48% of the oil and 40% of the gas are expected to be exported. The company also forecasts operating EBITDA to rise from $5.3 billion in 2025 to $11 billion in 2029, with free cash flow doubling to $3.1 billion.

This growth has turned YPF into one of South America’s most prominent state-owned energy companies, benefiting from the Vaca Muerta boom and expanded energy infrastructure. It is also a major achievement for Argentina’s economy, helping boost exports and reduce imports, thereby lowering the risk of trade deficits. Government data shows oil exports reached $5.5 billion in 2024, a 41% increase from 2023, contributing to a $19 billion trade surplus compared with a $7 billion deficit the year before.