Ahead Today
G3: US Mortgage Applications, Australia CPI
Asia: Philippines Budget Balance
Market Highlights
Markets were relatively quiet overnight, with the Dollar slightly weaker, equity markets marginally higher, while US yields were unchanged. Brent oil prices fell below US$80/bbl even amidst supply disruption from geopolitical risks and Libya’s production shutdown. With quite a lot of cuts already priced into US rates, the US Dollar and FX markets seem to be looking for the next catalyst be it from the Fed or from global growth expectations. On that front, the data released overnight highlighted continued structural challenges to global growth outside the US, with Germany’s 2Q GDP contracting 0.1% qoq led by a sharp drop in fixed investment. Meanwhile, China’s industrial profits rose to 4.1%yoy in July from 3.6%yoy previously, helped by strong profits in high-tech industries and manufacturers of lithium-ion batteries. Nonetheless, profits at traditional industries such as mining, steel mills, and oil and fuel processing businesses remained weak, and was emblematic of an economy still in transition and working through structural challenges including in the weak property market. US consumer confidence was stronger than expected, but the jobs plentiful minus jobs hard to get sub index softened further to lowest since March 2021.
Looking ahead, markets will look ahead at Australia’s CPI for July, where consensus is looking for a slowdown to 3.4%yoy from 3.8%yoy. The RBA has remained hawkish thus far and this has helped support AUD. Our global team expects the 1st RBA cut to come from 1Q2025, later than other global central banks.
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Regional FX
Asian FX markets were mixed as markets looked for the next catalyst. PHP (+0.15%), MYR (+0.2%), and SGD (+0.2%) outperformed, while INR and IDR underperformed (-0.03%). Thailand’s exports rose more than expected to 13%yoy in July, up from 10.7%yoy the previous month. This was driven by strong growth to the US (+26%yoy), ASEAN (+19%yoy) and EU (+17%yoy). Nonetheless, a pickup in imports to 13%yoy ultimately left the trade position in a deficit of US$1.4bn, up from a US$218mn surplus the previous month. We remain quite positive on the Thai Baht moving forward and see improvement in tourism, higher gold prices, coupled with a general gradual recovery in fiscal disbursement helping the economy and FX, notwithstanding domestic political risks.