Ahead Today
G3: US CPI, US NFIB Small Business Expectation
Asia: Bank of Thailand Policy Rate, Taiwan Exports, Taiwan CPI
Market Highlights
The US Dollar weakened slightly by 0.2% while US 10-year yields remained elevated at 4.42%, with risk sentiment slightly mixed with US equities unchanged overnight. This comes on the back of better-than-expected industrial production out of Germany, rising by 2.1%mom sa. This is also in line with the rebound in global manufacturing that we are already seeing including out of Asian exporters, notwithstanding the structural issues still plaguing Germany’s economy. Europe’s Sentix Investor Confidence also improved, while an ECB survey released yesterday showed more evidence of slowing wage growth.
Overall, all this points to an economy in Europe where expectations are already at rock bottom, and looks to be improving gradually. The upcoming ECB meeting this week could provide some initial indication of the timing and path forward for ECB rate cuts, which may come as soon as June this year.
With several markets in Asia on holiday tomorrow, the key risk event will also be tomorrow’s US CPI release. Markets are expecting a 0.3%mom rise in both the headline and core rate, and this will be important to attempt to gauge whether the inflation pickup at the start of 2024 is an aberration or something far more fundamental.
Regional FX
Asian FX markets traded somewhat mixed against the Dollar as the USD weakened overnight, with USDCNH at 7.244, USDSGD at 1.3477, and USDKRW at 1354. The Chinese central bank kept the onshore USDCNY fix unchanged at 7.0947, and on the back of slightly weaker US Dollar yesterday, would provide some further short-term relief for authorities. Nonetheless, with onshore USDCNY already pushing close to the top of the trading band, any further meaningful spikes in the broader Dollar could ultimately increase pressure for the PBOC to change their fixing strategy. Meanwhile, the Philippines central bank kept rates on hold in its April 2024 meeting, but tilted marginally more hawkish in its tone, in part by raising its 2024 risk-adjusted inflation forecast to 4.0% from 3.9% previously (see Philippines BSP April 2024). We remain neutral on the Philippines Peso and forecast USDPHP at 55.0 by 1Q2025. We will also have the Bank of Thailand’s monetary policy decision tomorrow. The consensus expectation is calling for no change in policy rate at 2.50%, with a small minority of Economists (6 out of 24) calling for a 25bps rate cut.
