Forex - Korea Preview: due 16-Oct - BoK to cut rate back to record low at 1.25%


 23:00 (GMT) 08 Oct

  [Economic Data]

Sample Premium Content
Korea Preview: due 16-Oct - BoK to cut rate back to record low at 1.25% (0101-PHQD-C01)

We expect Bank of Korea (BoK) to cut its 7-day repo rate by 25 bps to 1.25% during the MPC meeting on 16 October.

Persistent weak inflationary pressure and export woes have provided strong reasons for BoK to trim rate back to its record low at 1.25%. More importantly, the Fed's rate cut in September has given room for BoK to cut rate as well.

South Korea's exports fell by 11.7% y/y in September, which marked the tenth consecutive month of contraction. Meanwhile, Inflation slipped into deflationary territory at -0.4% y/y for the first time. China's slowdown, trade tensions, and the downturn in the semiconductor industry remain major concerns for South Korea. Thus, it is paramount that BoK steps in again since its July's rate cut, to lend further support to the ailing economy.

Given the high and rising household debt in South Korea, BoK is unlikely to ease too aggressively. Hence, we expect BoK to stay pat after the rate cut and turn to fiscal stimulus as the alternative source of economic support in 2020.


Forex - Asia Open - Overnight Highlights


 23:42 (GMT) 07 Oct

 [Forex Highlights]

Asia Overnight Highlights - 08 Oct 2019

MAJORS

FX Highlights:

The Bloomberg dollar spot index continued to trade below the 99 handle on Monday as trade talk jitters continued to unnerve investors. Reports were playing down a major breakthrough in US-China talks as China refused to make concessions on its industrial policy.

USD/JPY got support from gains in front end UST yields, and comments from Kudlow, saying delisting of Chinese companies was not on the table, and seeing possible progress in the US-China trade talks. A report from Fox business that China was prepared to do a partial deal saw a bounce to a high of 107.45.

In a quiet European morning EUR/USD had edged a little lower, helped by slightly weaker than expected Aug German factory orders, though offset by an upward revision to Jul. A pick up to 1.10 followed, despite the Sentix investor confidence index falling to its lowest since 2012.

GBP ended marginally lower with no real news on Brexit. EUR/CHF dipped below 1.09 but recovered as risk appetite improved. EUR/NOK and EUR/SEK were both firmer, NOK undermined by weak industrial production data and news of reduced spending from the sovereign wealth fund.

Gains in oil as tensions built over Turkey and Syria did help USD/CAD see lows below 1.33. AUD/CAD remained lower even as USD/CAD corrected on a firmer USD tone.

Data/Events Highlights:

- Kudlow said delisting Chinese companies not on the table.

- US Aug consumer credit +$17.9bn vs $15.0bn exp.

- In August, German manufacturing orders fell again by 0.6% m/m after an upwardly revised 2.1% m/m contraction in July (previous estimate was -2.7% m/m in July).

- Japan's August household spending was up by 1% y/y, in-line with expectations.

- VIX index: 17.86 (+4.81%)

- Gold Spot: $1,492.40/oz (-0.08%)

- ICE Brent front contract: $58.35 ($-0.02)

- Nymex WTI front contract: $52.86 (+$0.11)

- Reuters/Jefferies Commodities Index: 173.10 (-0.23%)

- 10y UST: 1.558% (+3bp) (Asia morning)

- DJI: 26,478.02 (-0.36%); S&P: 2,938.79 (-0.45%); Nasdaq: 7,956.29 (-0.33%)

Data/Events Ahead:

US Sep PPI is expected to show gains of 0.1% overall and 0.2% ex food and energy, with gasoline prices lower in the month as a whole despite a late bounce.

Focus would also be on Fed Powell's speech at the NABE conference today.

German industrial production is expected to have improved slightly in August by 0.2% m/m, after a modest fall in July, of 0.6% m/m. As a result, the output produced is expected to be 4.2% smaller than a year earlier. Survey data suggest a modest improvement in strictly industrial production and a moderate fall in construction output.

Japan's September Eco watchers survey is also due. Sentiment among economy watchers has slipped to a record low of 39.7 in August, and it is likely to continue to remain weak as the sales tax hike weighed on sentiment.

EMERGING ASIA

FX Highlights:

Asian currencies generally weakened on Monday, as US-China trade talks were eyed in the week. CNH (-0.31%) and PHP (-0.23%) were the worst performers. This came as China said it will not likely agree a broad deal with the US. TWD gained 0.22% in contrast. Quiet day in terms of data, and eyes remained on talks and FOMC minutes.

USD/CNH traded sideways around 7.1300 on Monday, eying the opening of the onshore China markets on Tuesday. Expectations of a break of the next resistance at 7.1858 are low at the moment. Onshore markets will return from holiday today. 1Y NDFs still unable to see gains above 7.2000 and traded sideways around 7.1950.

USD/SGD had a mild upside bias on Monday, but gains above 1.3820 were quickly reversed. Pair however remained supported above 1.3800 handle - trading sideways around 1.3810. We expect markets to remain cautious ahead of the resumption of U.S. - China trade talks on Thursday in Washington. Further upside can be seen towards the 1.3841 resistance.

USD/IDR 1M NDFs traded with an upside bias on Monday and tested the upside at 14240 but a frim break was not seen until last look. Onshore spot traded with a slight upside bias at the start of the new week, inching up to 14150+ from open of 14138 in early trading. Pair extended gains further to 14160+ levels in the afternoon. Room above 14200 remains limited to due to BI presence, and no strong supports are seen on the downside until 14058.

USD/INR 1M NDFs traded choppily around 71.350 on Monday as further signals on US-China trade talks were awaited. Onshore spot picked up some momentum to rise to 71+ levels in early trading on Monday from previous close of 70.880 as risk aversion was at play amid the looming US-China trade talks. Another round of RCEP negotiations are also scheduled for this week, which may keep investors on the edge. Pair continued to trade on either side of the 71 handle. Only break of support at 70.355 will turn the focus to the downside.

Data/Events Highlights:

Taiwan's September exports registered a surprise fall of 4.6% y/y while imports were down 0.6% y/y - bringing the trade balance $3.13bn - lower than estimates.

Data/Events Ahead:

No key data is scheduled in EM Asia on Tuesday.

DATA RELEASES DUE TODAY

01:30 GMT / 09:30 SGT - AU: NAB Business Conditions (Sep) [Prev: 1]

01:30 GMT / 09:30 SGT - AU: NAB Business Confidence (Sep) [Prev: 1]

01:30 GMT / 09:30 SGT - AU: ANZ Job Ads (Sep) [Prev: -2.8]

10:00 GMT / 18:00 SGT - US: NFIB Small Business Optimism (Sep) [Mkt: 102.5, Prev: 103.1]

12:15 GMT / 20:15 SGT - CA: Housing Starts (Sep) 4cast: 235k [Prev: 226.6]

12:30 GMT / 20:30 SGT - US: PPI (Sep) 4cast: 0.1% m/m [Mkt: 0.1, Prev: 0.1]

12:30 GMT / 20:30 SGT - US: PPI (ex Food & Energy) (Sep) 4cast: 0.2% m/m [Mkt: 0.2, Prev: 0.3]

12:30 GMT / 20:30 SGT - CA: Building permits (Aug) [Prev: 3]

EVENTS & AUCTIONS

IN: Market Holiday - Dusshera

04:00 GMT / 12:00 SGT - UK: BoE's Carney Speaks in Tokyo

09:30 GMT / 17:30 SGT - EU: ECB's Hernandez de Cos speaks in Frankfurt

09:30 GMT / 17:30 SGT - UK: BoE's Tenreyro speaks in Frankfurt

17:35 GMT / 01:35 SGT - US: Fed's Evans speaks in Chicago

17:50 GMT / 01:50 SGT - US: Fed's Powell speaks at NABE conference

18:00 GMT / 02:00 SGT - US: 3 year Notes Auction (USD 38bn)

21:00 GMT / 05:00 SGT - US: Fed's Kashkari takes part in townhall


Forex - Asia Open - Overnight Highlights


 23:49 (GMT) 06 Oct

 [Forex Highlights]

Asia Overnight Highlights - 07 Oct 2019

MAJORS

FX Highlights:

The Bloomberg dollar spot index traded sideways in Friday's NY session amid a mixed NFP report. The headline remained strong but the wage data was soft.

USD/JPY was unable to hold a bounce above 107.00 while post-payroll losses in EUR/USD were fully reversed, with a tight range between 1.095 and 1.10 holding. Late comments from Powell were mildly USD supportive.

White House's Kudlow said there has been a 'softening in the psychology of the trade talks' on both sides; deputies to meet Monday and Tuesday, principals on Thursday and Friday. AUD/JPY dipped lower to 71.919 in early trading amid jitters from the trade war.

UK government papers made it clear that the government would request a delay from the EU if there was no deal by Oct 19 but government sources told the BBC that they would find way to leave on Oct 31 anyway. Sources also indicated the chances of a deal before the European Summit were now "tiny". GBP weakened a little on the news, but erased most of its losses.

A USD/CAD dip nudged below 1.33 but was reversed, a fall in Canada's Ivey PMI below 50 helping to set the correction in motion. Apart from some brief volatility around the US data, AUD/USD moved steadily if slowly higher, but corrected slightly lower on Monday morning as trade talks were eyed in the week.

Data/Events Highlights:

- US Sep non-farm payroll +136k vs 145k exp, unemployment fell to 3.5% from 3.7% vs 3.7% exp, average hourly earnings 0.0% vs +0.2% exp.

- Fed's Bostic said latest China tariffs have potential to reach consumers.

- Fed's Rosengren said consumers strong, would be attentive to any signs of weakening.

- Fed's Powell said economy faces risks but overall in a good place.

- VIX index: 17.04 (-10.88%)

- Gold Spot: $1,507.41/oz (+0.18%)

- ICE Brent front contract: $58.25 ($-0.12)

- Nymex WTI front contract: $52.72 ($-0.09)

- Reuters/Jefferies Commodities Index: 173.49 (+0.05%)

- 10y UST: 1.529% (-1bp) (Asia morning)

- DJI: 26,573.72 (+1.42%); S&P: 2,952.01 (+1.42%); Nasdaq: 7,982.47 (+1.40%)

Data/Events Ahead:

We expect German factory orders to have fallen in August by 0.3% m/m. Following the 2.7% m/m contraction in July, this would bring the level of new orders down by close to 7% compared to August 2018.

Eurozone October Sentix Investor Confidence is out. The consensus expectation is for the index to soften from -11.1 to -12.5. Q2 house price index also out.

EMERGING ASIA

FX Highlights:

Majority of the Asian currencies were in the green against the dollar last week, as poor U.S. ISM and ADP employment data for September weakened the dollar. China markets also remained closed keeping Asian currencies steady. THB (+0.66%) led by a margin, followed by CNH (+0.36%). KRW (+0.28%) was seen in modest gains despite disappointing trade numbers and a deflation print. PHP (+0.26%) also saw gains even as a miss in inflation prompted calls for further easing. Only INR (-0.45%) and CNY (-0.36%) were seen in the red for the week. Geopolitical tensions ratchetted up as Hong Kong leader Carrie Lam invoked the emergency law amid the violent protests, banning face masks.

USD/CNH reversed the drop to sub-7.1100 levels seen in the NY session as trade talk jitters returned, and pair rose to 7.1250+ levels in early trading on Monday. Support at 7.0965, resistance at 7.1585. Onshore markets still on holiday. 1Y NDFs likewise inched above 7.1900 in early trading this morning after a slide to sub-7.1800 levels in Friday's NY session.

USD/SGD was seen back at the 1.3800 handle in Monday's early Asian session after being offered to 1.3777 lows in the previous session amid reports that China isn't willing to negotiate on certain US demands in the trade talks scheduled for this week. Risk is seen to 1.3778 strong support but a frim break below may remain unlikely as trade talk jitters return.

USD/IDR 1M NDFs remained close to 14180-levels in Friday's NY session. Onshore spot gapped lower to open at 14150 on the last day of the week from previous close of 14173 and slid to 1.5-week lows of 14125 in early trading amid missed in the US data. Week ahead brings key US-China trade talks back on the table, and volatility is likely. Room above 14200 remains limited to due to BI presence, and no strong supports are seen on the downside until 14058.

USD/INR 1M NDFs traded with a downside bias in the overnight session, and slid to 71.100-levels from a peak of 71.350 seen earlier in the European hours. Onshore spot slid lower earlier on Friday to intraday lows of 70.790 from previous close of 70.880 amid a slide in USD as economic data weakened. Pair however returned back to the 71 handle as RBI decision underwhelmed. Only break of support at 70.355 will turn the focus to the downside. Upside pressures to 71 are likely to stay.

Data/Events Highlights:

The Reserve Bank of India (RBI) decided to cut rates by a conventional quantum of 25bps on October 4th, after the previous 35bps cut, bring the repo rate to 5.15%.

The Philippines headline inflation eased to 0.9% y/y in September, the lowest in three years, furthering opening door to BSP rate cuts.

Malaysia's exports figures were weaker than market expectations, falling to -0.8% y/y in August from 1.7% y/y in July. Meanwhile, imports contracted to -12.5% y/y in August from -6.0% y/y in July. These lead to a trade balance of 10.92 MYR bn and underscored the drag on Malaysia's economy from the U.S.-China trade war.

Data/Events Ahead:

A quiet day ahead in the EM Asian markets with only Taiwan's September trade data eyed which will likely continue to show some trade diversion benefits.

DATA RELEASES DUE TODAY

00:00 GMT / 08:00 SGT - JP: Economy Watchers Survey (Sep) [Prev: 39.7]

05:00 GMT / 13:00 SGT - JP: Leading Indicator (Aug P) [Prev: 93.7]

07:30 GMT / 15:30 SGT - UK: Halifax House Price Index (Sep) % 3m y/y [Prev: 1.8]

08:00 GMT / 16:00 SGT - TW: Exports (Sep) % y/y [Prev: 2.6]

08:00 GMT / 16:00 SGT - TW: Imports (Sep) % y/y [Prev: -2.7]

08:00 GMT / 16:00 SGT - TW: Trade Balance (Sep) USD bn [Prev: 5.98]

08:30 GMT / 16:30 SGT - EU: Sentix Investor Confidence (Oct) [Prev: -11.1]

19:00 GMT / 03:00 SGT - US: Consumer Credit (Aug) USD bn [Mkt: 15, Prev: 23.294]

23:00 GMT / 07:00 SGT - KR: Current Account Balance (Aug) USD bn [Prev: 6.9494]

EVENTS & AUCTIONS

No Key Events Scheduled


Forex - Asia Open - Overnight Highlights


 23:46 (GMT) 03 Oct

 [Forex Highlights]

Asia Overnight Highlights - 04 Oct 2019

MAJORS

FX Highlights:

The Bloomberg dollar spot index traded bearishly following a weaker than expected US ISM non-manufacturing print which dipped to 3-year lows. A recovery was however seen quickly as Fed easing bets rose, supporting equities.

The USD slide sent EUR/USD to 1.10 but no further, and pair returned to 1.0970-levels at last look. Eurozone PMI data was weaker too, the German composite PMI the lowest since 2012 and Eurozone PMI the weakest since 2013.

USD/JPY briefly touched below 106.50 though managed a partial recovery as equities erased post-data losses, without returning to pre-data levels above 107.

GBP was little affected by the weaker than expected services PMI index which Markit said suggested GDP growth of -0.1% in Q3 and picked up ahead of the US data, despite there being little reason for optimism on a Brexit deal. Later in the session, the GBP corrected from its highs.

AUD/USD picked up to .6750 but CAD was more volatile, pressured by oil after the data before finding support as equities came off their lows. 1.3350 capped USD/CAD, while AUD/CAD reached .90.

Data/Events Highlights:

- US Sep ISM non-manufacturing fell to 52.6 from 56.4 vs 55.0 exp.

- US initial claims rose to 219k from 215k vs 215k exp.

- Fed's Kaplan said watching service sector extremely carefully, should not overact to one report.

- The Eurozone composite PMI fell from 51.9 in August to 50.1 in September (flash 50.4), thus moving from a clear expansion into a stagnation level.

- Activity in the UK services sector contracted slightly in September, according to PMI data showing the services index falling below no change-50 to 49.5 from 50.6 in August.

- VIX index: 19.12 (-7.00%)

- Gold Spot: $1,506.55/oz (+0.09%)

- ICE Brent front contract: $57.71 (+$0.02)

- Nymex WTI front contract: $52.36 ($-0.09)

- Reuters/Jefferies Commodities Index: 173.41 (+0.27%)

- 10y UST: 1.534% (-7bp) (Asia morning)

- DJI: 26,201.04 (+0.47%); S&P: 2,910.63 (+0.80%); Nasdaq: 7,872.27 (+1.12%)

Data/Events Ahead:

We expect U.S. non-farm payroll to increase by 140k, with a 130k increase in the private sector, improved from respective Aug increases of 130k and 96k but still consistent with trend having lost some momentum in recent months. We expect a 0.2% rise in average hourly earnings to correct an above trend 0.4% in Aug, but unemployment to fall return to its 3.6% low after 3 straight months on 3.7%.

German construction PMI will be released on Friday. The August reading saw a large fall to 46.3 from 49.5 in July and shows an ongoing fall from the peak of over 55 in March.

UK car registration numbers may provide some insight to the consumer, albeit where working days may act to boost this September outcome.

EMERGING ASIA

FX Highlights:

Majority of the Asian currencies were in the green against the dollar on Thursday. Dollar continued to weaken amid lacklustre U.S. September ADP employment data. THB, PHP and SGD recoded the highest gains of 0.3% against the USD, followed closely by INR (+0.29%) and CNH (+0.28%). Onshore China and South Korea markets remained closed on Thursday. RBI decision will take the limelight in Asia today.

USD/CNH traded with a downside bias on Thursday, inching lower to sub-7.1300 levels in the NY session from near-7.1500 as onshore markets remained on holiday. Expectations of a break of the next resistance at 7.1858 are moderate. 1Y NDFs likewise traded bearishly and slid to sub-7.1950 levels after trading above 7.2100 at the start of the day.

USD/SGD traded with a downside bias on Thursday, as dollar continued to weaken on the back of poor U.S. September ADP employment data and then the disappointing US ISM non-manufacturing print. A break below the 1.3800 handle was seen with lows at 1.3785, and a recovery to 1.3800+ levels followed. Risk is seen to 1.3778 strong support and a frim break below will open plenty of room on the downside.

USD/IDR 1M NDFs saw a sharp slide from 14240+ levels to lows of 14184 ahead of Thursday's NY session and traded sideways around 14200 thereafter. Onshore spot traded close to 14190 for most of Thursday but slid sharply to 14173 lows into the lows. Room above 14200 remains limited to due to BI presence, and no strong supports on the downside until 14058.

USD/INR 1M NDFs peaked at 71.600 on Thursday and traded with an offered tone to sub-71.200 levels before a slight recovery to 71.300 later. Onshore spot saw initial gains to 71.340 but gears were reversed later and prices dipped to sub-71 handle again into the close. RBI's policy decision on Friday, and we expect further easing as growth indicators continue to falter. Only break of support at 70.115 will turn the focus to the downside.

Data/Events Highlights:

Singapore's September PMI softened to 49.5 from 49.9 in August.

Data/Events Ahead:

The RBI decision will likely take the limelight in EM Asia on Friday - we expect a further 40bps cut.

Philippines' September CPI will be released in the morning followed by Malaysia's August trade data around noon.

DATA RELEASES DUE TODAY

01:00 GMT / 09:00 SGT - PH: CPI (Sep) 4cast: 1.3% y/y [Mkt: 1.1, Prev: 1.7]

01:30 GMT / 09:30 SGT - AU: Retail Sales (Aug) 4cast: 0.3% m/m [Mkt: 0.5, Prev: -0.1]

04:00 GMT / 12:00 SGT - MY: Imports (Aug) 4cast: -6.5% y/y [Mkt: -8, Prev: -5.9]

04:00 GMT / 12:00 SGT - MY: Exports (Aug) 4cast: 4% y/y [Mkt: 2.7, Prev: 1.7]

04:00 GMT / 12:00 SGT - MY: Trade Balance (Aug) 4cast: 9.98MYR bn [Mkt: 10.7, Prev: 14.27]

05:00 GMT / 13:00 SGT - IN: Composite PMI (Sep) [Prev: 52.6]

05:00 GMT / 13:00 SGT - IN: Services PMI (Sep) [Prev: 52.4]

06:15 GMT / 14:15 SGT - IN: RBI - Repo Rate (43742) 4cast: 5% [Mkt: 5.15, Prev: 5.4]

12:30 GMT / 20:30 SGT - US: Trade Balance (Aug) 4cast: -54.6USD bn [Mkt: -54.5, Prev: -54]

12:30 GMT / 20:30 SGT - US: Average Hourly Earnings (Sep) 4cast: 0.2% m/m [Mkt: 0.3, Prev: 0.4]

12:30 GMT / 20:30 SGT - US: Non-farm Payrolls (Sep) 4cast: 140k [Mkt: 147, Prev: 130]

12:30 GMT / 20:30 SGT - US: Private Payrolls (Sep) 4cast: 130k [Mkt: 130, Prev: 96]

12:30 GMT / 20:30 SGT - US: Unemployment (Sep) 4cast: 3.6% [Mkt: 3.7, Prev: 3.7]

12:30 GMT / 20:30 SGT - CA: Trade Balance (Aug) 4cast: -0.9CAD bn [Mkt: -1.2, Prev: -1.12]

14:00 GMT / 22:00 SGT - CA: Ivey PMI (Sep) [Prev: 60.6]

EVENTS & AUCTIONS

02:30 GMT / 10:30 SGT - AU: RBA's Ellis speaks in Geelong

11:25 GMT / 19:25 SGT - EU: ECB's Guindos Speaks in Sevilla

12:30 GMT / 20:30 SGT - US: Fed's Rosengren speaks in Boston

14:25 GMT / 22:25 SGT - US: Fed's Bostic speaks at Tulane University

18:00 GMT / 02:00 SGT - US: Fed's Powell makes opening remarks at Fed listens event


CurrenciesCountriesMarket Bulletins

Latest Currency Analysis

Available to subscribers only
Order Now