Ahead Today
G3: Europe PMI, US S&P PMI, IP
Asia: China 1-year MLF, IP, Retail Sales, Property Investment, New Home Prices, Indonesia Trade Balance
Market Highlights
The European Central Bank and Bank of England both kept rates on hold, but pushed back against rate cut bets by the market. ECB President Lagarde said the central bank “did not discuss rate cuts at all” at the meeting, while emphasising that the long plateau that rates are on. While Europe’s inflation has fallen, Lagarde remained concerned that domestic inflation is still sticky. BOE remained much more hawkish on a relative basis, with 3 MPC members continuing to vote for a 25bps hike.
With the ECB diverging from a relatively more dovish Fed, the Dollar weakened by 0.9% with EURUSD rising to 1.10 at some point. US 10-year yields fell further to 3.94% while S&P500 rose marginally by 0.2%.
Meanwhile, Chinese authorities relaxed homebuying curbs in Beijing and Shanghai, cutting the downpayment ratio for 1st homes to 30% (from 35% or 40% earlier). Downpayment ratios for second homes were cut to 40% or 50%, depending on the location of the properties, while also relaxing the definition of non-luxury homes. These moves come on the back of the Politburo and Central Economic Work Conference (CEWC), and also ahead of the 1-year MLF rate decision out later today.
Regional FX
Asian FX were stronger against the Dollar on the back of the hawkish ECB and weaker Dollar, together with policy easing in China’s property market. USDCNH fell to 7.12, while SGD strengthened to 1.329 against the Dollar. On top of the 1-year MLF decision, we will also have key data for China’s for the month of November such as industrial production, retail sales, and fixed asset investment. Consensus is expecting some further pickup in retail sales and IP, but coupled with soft investment activity. Meanwhile, the Philippines central bank kept rates on hold. While the BSP kept rates on hold and retained a hawkish bias, they seem more comfortable both with where inflation is at the moment barring further supply side shocks, coupled with recent movements in the USDPHP rate. The emphasis seems to be on keeping rates on hold for now, while also highlighting that inflation could briefly fall into the central bank’s inflation target in 1Q2024 barring upside risks.
