Ahead Today
G3: US initial jobless claims, existing home sales
Asia: India CPI
Market Highlights
The broad US dollar index (DXY) remains supported as US Treasury yields rose across the curve, with the 2-year yield up around 6bp. Fed funds futures also pushed out expectations for the next Fed rate cut from June to July, with a July cut now fully priced, following a stronger than expected US nonfarm payrolls report.
Nonfarm payrolls rose by 130k in January, rebounding from 48k in December and beating market expectations. The unemployment rate edged down to 4.3% from 4.4%, labour force participation rate inched up to 62.5% from 62.4%. while average hourly earnings were unchanged at 3.7%yoy. The upside surprise in nonfarm payrolls contrasts with recent softer labour indicators, including fewer job openings in December and slower private sector payroll gains in January.
The USD stayed firm against the euro and sterling but weakened notably against the yen, with USDJPY falling 0.7%. Comments from Japan’s Prime Minister Takaichi acknowledging market concerns over a proposed two-year sales tax cut on food, while reiterating that the government will avoid issuing JGBs to finance the measure, may have helped to support the yen.
Regional FX
Asian currencies broadly strengthened against the US dollar in yesterday’s session, anchored by a firmer Japanese yen. The stronger yen also supported the Korean won, which gained around 0.7% against the US dollar, while gains in other ASEAN currencies were more modest. Against the backdrop of a generally softer US dollar, Asian currencies are likely to continue strengthening. Within ASEAN FX, we retain our positive outlook on the SGD and MYR, underpinned by continued CNY strength.
A key focus today is Singapore’s 2026 Budget, where additional support measures for workers are likely to be announced to help them cope with technological disruption and a highly uncertain global environment. The budget is expected to be pro-growth, with an emphasis on job transitions and workforce upskilling. Singapore’s fiscal position should remain sound, providing structural support for the SGD outlook. Combined with expectations of a softer US dollar, we see scope for the SGD to strengthen further versus the US dollar.
China’s CPI data continue to point to subdued inflation, with headline CPI slowing sharply to just 0.2%yoy in January from +0.8%yoy in December. This reinforces the case for a continued dovish stance from the PBOC.