Ahead Today
G3: Eurozone manufacturing PMI
Asia: China Caixin PMI, Indonesia inflation, Singapore PMI
Market Highlights
The rebound in the US dollar index has continued for a third straight day last Friday, marking a near-term bottoming at the 100.50 level. And it is looking more like a gradual pace of US rate cuts ahead, with the US economy still largely resilient. US personal income rose 0.3%mom in July, from 0.2%mom in June, while real personal spending rose 0.5%mom, from 0.3% in June. Consumer sentiment based on the University of Michigan survey also ticked up in July. Meanwhile, US core PCE inflation steadied at 0.2%mom or 2.6%yoy in July, in line with market expectations. On a 3-month annualized basis, core PCE inflation slowed to just 1.7%, keeping a September Fed rate cut intact. Eyes will be on the US nonfarm payroll and unemployment rate on 6 September, which will be the last available jobs data before the September 17-18 FOMC meeting. It is crucial to watch for any unexpected labour market weakness, as it could lead to a larger 50bps US rate cut this month.
Meanwhile, China’s residential property declines persisted in August, with new home sales values from 100 biggest real estate companies dropping 26.8%yoy, weighing on Chinese consumer confidence. The manufacturing PMI has also remained in contraction. To further support the property sector, the government has proposed for local government to buy homes via special bonds and allow homeowners to refinance at lower costs.
Regional FX
The JPY (-1.3%) and KRW (-0.6%) gave back some gains against the US dollar last week. But several other Asian currencies either held on to or extended their gains against the US dollar, despite the US dollar rebound. Notably, MYR (+1.2%) and THB (+1.2%) strengthened further, while USDCNH fell below the 7.1000-level. However, with many Asian currencies looking overbought against the US dollar, there could be a near-term pullback. In contrast, the INR has been nonchalant, despite the weaker US dollar and a slowdown in growth. India’s GDP growth slowed to 6.7%yoy in Q2, from 7.8% in Q1. This, coupled with India’s inflation easing to 3.5%yoy in July (below RBI’s 4% target), may provide room for RBI easing over coming months.
