Ahead Today
G3: US initial jobless claims, trade balance; Germany factory orders
Asia: Indonesia and Malaysia foreign reserves
Market Highlights
The latest US data releases paint a mixed picture of the economy. The ADP employment report showed private payrolls rising by just 41,000 in December, a modest rebound from November’s 29,000 decline but still below market expectations for a 50,000 gain. JOLTS job openings moderated to 7.146 million in November from 7.449 million in October, signalling softer labour demand. However, the layoffs rate remains low at 1.1%, down from 1.2%.
In contrast, the ISM services index delivered a strong upside surprise, climbing to 54.4 in December from 52.6 in November, beating consensus expectations of 52.2. The improvement was broad-based, with new orders jumping to 57.9 from 52.9 and employment rebounding to 52.0 from 48.9. The rebound in services employment is particularly notable, helping to ease concerns about a sharp slowdown in the labour market. Meanwhile, the prices paid sub-index eased slightly to 64.3 from 65.4, indicating that inflationary pressures remain elevated but are gradually moderating.
While labour market indicators from the ADP and JOLTS reports point to cooling hiring demand, the resilience in services activity signals potential for a pickup in growth in the coming months. For the Fed, this mix of signals could reinforce a cautious approach. Market expectations for 60bps of rate cuts remain intact, but the strong ISM services reading could temper calls for aggressive easing. The US dollar (DXY) is holding firm near the 98.00 level after finding support there.
Regional FX
Asian currencies broadly weakened against the US dollar yesterday. PHP fell 0.3% to a new low after the BSP signalled further policy easing, with the 59.00 threshold against the US dollar no longer appearing stringent. In contrast, the INR outperformed regional peers, gaining 0.3%, likely supported by RBI intervention, with USDINR dipping back below the 90.00 level. Meanwhile, USDCNY edged higher toward the 7.00 psychological level, following a slight increase in the PBOC’s daily fixing rate.
Elsewhere, the Bank of Thailand said that it will take a medium-term approach to monetary policy, emphasizing the need to preserve limited policy space while monitoring financial stability. Its comments suggest there may just be one more 25bps rate cut for this year, which would bring the policy rate down to 1.00%. Thailand’s CPI inflation printed at -0.3%yoy in December, less negative than November’s -0.5%yoy.