Ahead Today
G3: Germany PPI
Asia: China Loan Prime Rate, Thailand 3Q GDP, Malaysia Exports and Trade, Taiwan Current Account
Market Highlights
US housing starts were stronger than expected at 1372k, a 1.9% mom increase, although these numbers came on the back of generally weaker housing market sentiment such as in the NAHB Housing Market Index due to elevated mortgage rates. Fed San Franciso President Mary Daly said that she is not certain inflation is on track to return to 2%, while the central bank is unsure about the length of policy lags and how much more tightening is to be fully realized.
Meanwhile, as Brent Oil settled around US$80/bbl, the Financial Times reported that OPEC+ may weigh extending or even intensifying oil production cuts in its 26 November meeting. This comes amidst stronger oil supply from non-OPEC countries including the US coupled with concerns over the strength of global demand.
The key focus of markets today will be on China’s 1-year and 5-year loan prime rate decision. The consensus expects the Chinese central bank to keep rates on hold at 3.45% and 4.2% respectively, although we think the bias is tilted towards rate cuts.
Regional FX
Asian currencies were generally stronger amidst a weaker US Dollar, with TWD, THB and MYR outperforming. The upcoming week will feature policy decisions by Bank Indonesia, where we expect the central bank to remain on hold amidst a more stable IDR (see Asia FX Weekly: Exports data likely moves the Asian currencies). In addition, there will also be exports data for Taiwan, South Korea, Malaysia, and Thailand, together with GDP prints from Singapore and Thailand. It will be important to see if the recent green shoots in Asia exports is sustained in October. Meanwhile the Reserve Bank of India announced regulatory measures to manage fast growth in consumer credit, with increased risk weights on certain consumer credit and bank lending to non-bank financial corporations (NBFCs). Overall, we think these measures could raise lending rates for certain types of consumer credit, and also raise borrowing costs for NBFCs, which have been increasingly reliant on bank funding. They ultimately constitute a form of tightening of financial conditions, and fits in with our view that RBI remains hawkish and on a prolonged rate pause for now.
