Ahead Today
G3: US: real personal income, core PCE prices, wholesale inventories, University of Michigan consumer confidence; euro area consumer confidence
Asia: China industrial profit, Thailand foreign reserves
Market Highlights
The US dollar index fell 0.3% on Thursday’s session, despite a 7bps rise in the US 2y yield. Markets have continued to price in a 50bps US rate cut in November, though the odds have been pared back to 51% from 59% a day ago as the latest US economic data still show some resilience. US GDP grew 3%qoq annualized in Q2, in line with prior estimates, while personal consumption grew 2.8%qoq annualized, only a touch lower than previous estimates. Durable goods orders were flat in August from +9.8%mom in July, but they beat market expectation for a 2.6% decline. Initial jobless claims eased to 218k in the week ending 21 September from 219k in the prior week, lower than market expectation of 223k. Pending home sales were also up slightly by 0.6%mom following a 5.5% drop in July. Chair Powell gave a pre-recorded speech at the US Treasury Conference yesterday, but he did not comment on economic and monetary policy.
Meanwhile Japan’s leading political party, the LDP (Liberal Democratic Party) will have its leadership election today. The yen has weakened against the US dollar, given increasing odds that Ms. Sanae Taikaichi could become the next LDP leader in Japan. On her economic policy agenda, she has signalled for easy fiscal and monetary policies. So, if she is elected at the leadership election today, it may be difficult for the BoJ to raise interest rates.
Regional FX
CNH gained 0.9% against the US dollar, breaking the psychological 7-handle to trade at the strongest level since May 2023. Positive spillover effects were seen on the KRW (+1.4%), THB (+0.5%), and SGD (+0.5%). This follows from a slew of economic stimulus measures introduced by the Chinese authorities to achieve their 2024 GDP growth target of 5%. In addition to recent PBOC monetary policy easing, China’s Politburo pledged yesterday to support fiscal spending and halt the slide in the real estate sector. Markets have welcomed policy actions to stimulate China’s economy, with sentiment turning positive on Chinese equities.
Meanwhile, Singapore’s industrial production jumped 21%yoy in August, from 1.8% in July, beating market expectation of 8.6% and suggesting a solid pace of economic growth in Q3. This was largely driven by robust electronics production (+49.1%yoy). On a sequential basis, industrial production rose 6.7%mom. Excluding the volatile biomedical segment, manufacturing rose 11%mom. The latest trade data show non-oil domestic exports (NODX) fell 3.2% on a 6m/6m rolling sequential basis. But within NODX, electronics exports (+35.1%yoy) were a notable bright spot.
