Ahead Today
G3: Fed speeches from Bostic, Barkin, and Williams
Asia: India CPI
Market Highlights
The US dollar held firm despite softer-than-expected US non-farm payrolls. Nonfarm payrolls rose by 50,000, below Bloomberg consensus of 70,000 and November’s 56,000. Fed’s Barkin described the jobs reports as reflecting modest job growth and a sustained low-hiring environment. Markets, however, shifted their focus to the decline in the unemployment rate to 4.4% in December. This, alongside Fed Bostic’s comment that inflation stays well above the 2% target, could reinforce the Fed’s cautious stance on policy easing. With geopolitical tensions rising and US corporate earnings season kicking off next week, USD strength could stay supported in the near term.
Meanwhile, the Japanese yen was the clear underperformer, weakening even before headlines emerged that Japan’s Prime Minister Takaichi considers calling a snap election in mid-February, which could strengthen her political base and raise the prospects of increased fiscal stimulus. This could amplify market concerns over fiscal debt trajectory, reinforcing a bearish bias on the yen and pushing Japanese long-term yields higher.
Regional FX
For Asian currencies, we expect a cautious start to the week, amid a pickup in geopolitical risks that could keep USD strength in play in the near term. These geopolitical hotspots include worsening protests in Iran, lingering tensions in Venezuela following US President Trump’s capture of Venezuelan leader Maduro, and Trump’s threat to annex Greenland.
In Malaysia, November industrial production slowed to 4.3%yoy, from 6% in October. But on a 3-month average basis, industrial production remained robust at 5.3%yoy in November. Merchandise exports were also up by 11.7%yoy in November on a 3-month average basis. We estimate that Malaysia’s Q4 GDP growth (due on 16 Jan) could come in at 5.1%yoy, holding steady relative to Q3 pace, lending support to the ringgit.