Asia FX Talk - Extending the Truce

Ahead Today

G3: US Home Prices, US Consumer Confidence

Asia: Taiwan GDP, South Korea Department Store Sales

Market Highlights

Israel and Hamas agreed to extend their truce by two days, following negotiations over the release of more hostages. According to news reports, Hamas has committed to free 20 more women and children, coming on the back of the release of 11 hostages on Monday as part of the initial cease-fire. These developments juxtaposed with news in the oil market, with Saudi Arabia asking others in the OPEC+ coalition to reduce their oil-output quotas in a bid to support oil prices. Overall, Brent oil prices fell by 1% below US$80/bbl.

US new home sales fell by 5.6%, providing additional signs that higher mortgage rates have started to hit the housing market. Meanwhile, US consumers have increased spending during the Thanksgiving and Black Friday holiday season. Adobe Analytics estimated Black Friday e-commerce sales jumped 7.5%yoy, while Thanksgiving sales rose 5.5%yoy, as consumers took advantage of Buy Now Pay Later plans. How much of this was due to consumers trading down and seeking discounts, as opposed to having confidence to spend is unclear.  

Regional FX

Asian FX pairs were generally stronger against the Dollar on back of a weaker USD. SCMP reported that Xi Jinping will visit Shanghai for the first time since the two-month COVID lockdown, and is scheduled to visit the Shanghai Futures Exchange and several technology giants operating in the city. This first public visit could send a further signal about China’s determination to reinvigorate private sector and investor confidence. Meanwhile, China’s industrial profits for October slowed down, suggesting that the economic recovery remained fragile. The Monetary Authority of Singapore released its Financial Stability Review yesterday. The central bank noted stress tests showed that households remained resilient even in adverse scenarios. Meanwhile, while 70% of mortgages have already seen some pass-through of higher interest rates, data showed that households have also started to pay down their debt as they refinanced, lowering their vulnerability and indicating still strong household balance sheets to withstand interest rate shocks.