Ahead Today
G3: US CPI, eurozone GDP
Asia: GDP data from Malaysia and Taiwan
Market Highlights
Stronger-than-expected US nonfarm payrolls have helped ease some near-term market concerns about a sharp deterioration in the labour market, but the data did little to meaningfully shift the broader macro narrative. The US dollar held firm following the nonfarm payrolls report, yet failed to generate sustained upside momentum, reflecting market skepticism about how much further US rates can reprice in a hawkish direction. Beyond payrolls, other labour indicators have continued to soften, including job openings and private sector hiring.
Focus now shifts squarely to the US CPI release later today, which is likely to be the next key catalyst for rates and FX markets. Our US strategist expects January core CPI to rise by 0.25%mom and 2.6%yoy, with base effects providing a notable lift to the annual print. Bloomberg consensus, by comparison, looks for 2.5%yoy for both headline and core CPI. From a market perspective, CPI would likely need to exceed market expectations to trigger a renewed hawkish repricing of the Fed rate path. Conversely, an outcome broadly in line with consensus, or softer, should allow markets to maintain expectations for around two Fed rate cuts this year, containing dollar upside.
Regional FX
Asian currencies broadly strengthened against the US dollar in yesterday’s session, led by the Korean won, which rose 0.5% against the dollar. The main risk to the recent strength in Asian FX would be a materially hotter-than-expected US CPI print, which could trigger a renewed lift in the US dollar. Absent such an upside surprise, Fed rate-cut expectations are likely to remain intact, keeping the USD on the back foot and providing broad support for Asian currencies.
In India, CPI inflation rose to 2.8%yoy under the rebased series (with 2024 as the base year), driven primarily by food inflation. This brings inflation back within the RBI’s 2%-6% target range and should allow the central bank to remain on hold at its next policy meeting in April.
In Singapore, the fiscal impulse turns less supportive in FY26. In yesterday’s Budget announcement, the government projected a smaller surplus of S$8.5bn (1.0% of GDP) in FY26, compared with an estimated S$15.1bn (1.9% of GDP) in FY25. Notably, a key focus is on building national AI capabilities. This could reinforce the medium-term narrative of higher potential growth alongside contained inflation, dynamics that are typically supportive for the SGD. Moreover, Singapore’s continued ability to run fiscal surpluses while funding economic transformation reinforces its “macro resilience” credentials. Meanwhile, the government also reiterates its commitment to maintaining a balanced budget over time. This keeps Singapore’s sovereign and fiscal risk premium low, providing a structural anchor for currency strength.