Ahead Today
G3: Germany’s 4Q final GDP and IFO business survey
Asia: Thailand trade and foreign reserves, and CPI data for Singapore and Malaysia
Market Highlights
US initial jobless claims fell to 201k in the week ending 16 February, from a revised 213k in the week prior, underscoring continued resilience in the labour market. US manufacturing PMI rose to 51.5 in February from 50.7 in January. US services PMI eased to 51.3, from 52.5 in January, but remained in expansionary territory (>50). Existing home sales were up 3.1%mom to a seasonally adjusted annual rate of 4mn units in February. Meanwhile, US Fed Vice Chair Jefferson said it is appropriate for the Fed to start easing later this year, but he has warned against “easing too much”, as this could stall or reverse the progress made in restoring price stability. The US dollar index was little changed, while the US 10-year yields inched higher to a year-to-date high of 4.33% as markets dialed back rate cut expectations. Resilient US economic data and strong Nvidia earnings have supported risk appetite for US equities.
ECB’s meeting minutes for January show policymakers remain cautious about early rate cuts, with markets further paring back expectations for ECB rate cuts to below 100bps this year. Euro area PMIs show services activity picking up, offsetting the drag from the manufacturing sector, particularly in German manufacturing. Euro area headline inflation slowed to 2.8%yoy in January from 2.9% in December.
Regional FX
Asian currencies largely gained against the US dollar yesterday. Notably, the KRW, MYR, and PHP strengthened by about 0.4%-0.5% against the US dollar. The Bank of Korea (BoK) left its policy rate unchanged at 3.5% in February, but BoK governor Rhee has disclosed that one board member is open to a rate cut over the next three months. Governor Rhee has pushed back against an early rate cut and added that a rate cut in 1H 2024 is unlikely. There are no changes to the BoK’s GDP growth forecast of 2.1% in 2024 and its 2.6% outlook for inflation.
India’s manufacturing PMI rose to 56.7 in February (56.5 in January), while its services PMI was 62 (61.8 in January), suggesting a continuing strong pace of expansion in economic activity.
A key focus later today will be on Singapore’s inflation data for January. Market consensus is for core inflation to pick up to 3.6%yoy, from 3.3%yoy in December. Sticky core inflation will lead to the MAS keeping its tight policy setting, which is supportive of the SGD.
