Forex - REVIEW- Philippines Q2 GDP growth missed expectations, eased to a 4-year low

 02:26 (GMT) 08 Aug

  [Economic Data]

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REVIEW- Philippines Q2 GDP growth missed expectations, eased to a 4-year low (0101-NDHD-C01)

The Philippines economy slowed down further in the second quarter. Q2 GDP missed market expectations and rose by only 5.5% y/y, the lowest in about four years. Government spending growth remained soft, as impact of delay in budget approval dragged on. Gross fixed capital extended the downtrend, and fell by 4.5% y/y in Q2 following a rise of 6.4% y/y in Q1. Export growth slowed down further to 4.4% y/y, while import growth was flat.

Disappointing Q2 growth added to economic growth concerns in the Philippines. Bangko Sentral ng Pilipinas (BSP) will announce policy decision later today, with a 25-bps reduction already seen by the markets. However, the recent turn of events such as escalating US-China trade war and prospect of further easing by the Fed have increased the odds of more easing by the Bank. We think that bigger cut such as a 50 bps rate cut is also not ruled out.

Forex - Flows: Net Foreign Equity Flows on Tue

 01:17 (GMT) 07 Aug

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Forex - Asia Open - Overnight Highlights

 23:49 (GMT) 05 Aug

 [Forex Highlights]

Asia Overnight Highlights - 6 Aug 2019


FX Highlights:

The Bloomberg dollar spot index saw a bearish tone overnight on Monday following heightened tensions between US and China with currency manipulation being added as a tool in the trade war fight. Weak services ISM print also weighed.

The European morning saw EUR/USD rise above 1.1150 for the first time since before the FOMC meeting, pushing above 1.12 in North America and printing fresh highs of 1.1236 in early Asian trading after US Treasury labeled China a currency manipulator.

CHF was the best performer in early Europe, with EUR/CHF hitting a new 2 year low at 1.0865 before returning to around 1.09. GBP weakened against the EUR with EUR/GBP touching a new 2 year high at 0.9240, but dips in GBP/USD found buyers, Cable sticking to the 1.21 handle.

USD/JPY recovered slightly from the lows seen in Asia, pushing back above 106, comments from MoF's Takeuchi that the FX market was being watched noted. Another drop to 105.52 however followed earlier this morning.

USD/CAD slipped as oil came off its lows but was unable to hold below 1.32. AUD/USD held above Asian lows but failed to move above .6785. NZD/USD rocketed by over 50 pips to about 0.6587 on upbeat Q2 labour market data which saw unemployment rate drop to 3.9% from 4.3%.

Data/Events Highlights:

- US Jul ISM non-manufacturing index fell to 53.7 from 55.1 vs 55.5 exp.

- Fed Senior Loan Officer Survey shows improved demand for mortgage and consumer loans, less negative demand for C+I and commercial real estate loans, supply conditions on balance little changed.

- European PMIs were mixed with upward revisions in French and Italian services offset by a downward revision to Germany. Eurozone composite PMI was unrevised at 51.5. UK services PMI stronger than expected at 51.4. Swedish services PMI recovered to 52.3 in July from 49.4 in June. The Eurozone Sentix index of investor sentiment fell to -13.7 in August from -5.8 in July, lowest since October 2014. The ECB bulletin said any recovery in trade is likely to be mild due to a subdued investment outlook.

- UK July services PMI numbers, with a surprise rise of 1.2 points to 51.4, more than repaired the drop seen in June.

- VIX index: 24.59 (+39.64%)

- Gold Spot: $1,472.56/oz (+0.60%)

- ICE Brent front contract: $59.81 ($-2.08)

- Nymex WTI front contract: $54.19 ($-0.50)

- Reuters/Jefferies Commodities Index: 171.49 (-1.08%)

- 10y UST: 1.708% (-14bp) (Asia morning)

- DJI: 25,717.74 (-2.90%); S&P: 2,844.74 (-2.98%); Nasdaq: 7,726.04 (-3.47%)

Data/Events Ahead:

German Factory orders for June will be released, where we look for a 0.8% m/m rise following a sharp 2.2% m/m fall in May.

Japan's June household spending and labor earnings data is also due.


FX Highlights:

China's weak PBOC fixing rattled Asian currencies on Monday. Markets are concerned that trade wars are spilling over to currency wars. U.S.' overnight move to label China as a currency manipulator aided further risk aversion. CNH (-1.73%) and CNY (-1.56%) saw heavy losses. INR (-1.59%) was also pressured by Kashmir tensions. KRW (-1.40%), TWD (-0.78%), PHP (-0.67%), SGD (-0.53%), IDR (-0.49%) and MYR (-0.47%) - all were in the red against the greenback.

USD/CNH broke the 7 handle on Monday in the Asian hours and rose further to 7.1400 early this morning after US labeled China as a currency manipulator. Pair now in unchartered territory. 1Y NDFs likewise extended Monday's gains to 7.1800 in early Tuesday hours. USD/CNY onshore spot gapped higher on Monday and traded to fresh record highs of 7.0548. Eyes on a break above 7.1000 following USD/CNH.

USD/SGD also extended gains as trade war concerns ramped up, and a break of 1.3850 was seen in early trading on Tuesday. Pair printed fresh 9-month highs1.3869 being one of the most trade open economies in the region. Expect a break of 1.3873 resistance as Asian traders come online to the news of China being called out a currency manipulator.

USD/IDR 1M NDFs maintained a bullish bias, and rose to 14550+ levels from sub-14350 levels seen earlier on Monday. Onshore spot moved higher to 14250+ levels and extended gains to fresh 6-week highs of 14280 in the afternoon. Q2 GDP release was in-line with expectations, and paved way for further BI easing. Eyes are on a break above 14300, but intervention may delay the move to 14500.

USD/INR 1M NDFs broke above 71.500 in Monday's NY session - rising 1 big figure since the start of the week. Onshore spot gapped higher to open above the 70 handle on Monday at 70.145 from Friday's close of 69.5850 and rose to 5-month highs of 70.740 amid heightened Kashmir tensions. Global events also weighed on the rupee with China letting the yuan cross the 7/USD mark, suggesting currency manipulation would be added as a trade war tactic. The announcement of scrapping of Article 370 weighed on rupee, but intervention halted further highs in USD/INR. Focus now on the RBI meeting this week, where another rate cut is likely. Any further escalations could prompt a test of the 71 handle.

Data/Events Highlights:

Indonesia's Q2 GDP came in line with expectations at 5.05% y/y, and we believe BI will ease more to support growth.

Data/Events Ahead:

Philippines' July CPI will be watched closely ahead of the BSP decision later this week. Taiwan's July CPI is also due in the afternoon.


- 01:00 GMT / 09:00 SGT - PH: CPI (Jul) 4cast:2.5 % y/y [Mkt: 2.4, Prev: 2.7]

- 01:30 GMT / 09:30 SGT - AU: Trade Balance (Jun) 4cast:5658 AUD mn [Mkt: 6000, Prev: 5745]

- 04:30 GMT / 12:30 SGT - AU: RBA - Cash Rate Target (Aug 6) 4cast:1 % [Mkt: 1, Prev: 1]

- 08:00 GMT / 16:00 SGT - TW: CPI (Jul) % y/y [Mkt: 0.79, Prev: 0.86]


03:35 GMT / 11:35 SGT - JP: 30 yr Bonds Auction

09:30 GMT / 17:30 SGT - EU: ECB Main Refinancing Operation Result

10:30 GMT / 18:30 SGT - UK: 2025 0.625% Conventional Gilt Auction (GBP 3bln)

14:05 GMT / 22:05 SGT - US: Fed's Harker speaks in Philadelphia

16:00 GMT / 00:00 SGT - US: Fed's Bullard speaks on economy

17:00 GMT / 01:00 SGT - US: 3yr Note Auction (USD 38bln)

23:50 GMT / 07:50 SGT - JP: BoJ's summary of opinions

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