Ahead Today
G3: US University of Michigan consumer sentiment index, S&P Global US PMI, and wholesale inventories; eurozone PMI
Asia: Malaysia CPI, India PMI
Market Highlights
US September employment data painted a mixed picture. Nonfarm payrolls rose by 119,000, beating Bloomberg consensus of 53,000, while August payrolls were revised down to a small contraction of 4,000 from the previously reported gain of 22,000. This left the three month average change at +62,000, up from +18,000 in the prior month. However, the unemployment rate edged higher to 4.4% from 4.3%. Markets priced in only a 35% probability of a December Fed rate cut, the US dollar held firm, while US equities tumbled.
Meanwhile, the yen weakened further as domestic policy shifts came into focus. Prime Minister Takaichi is set to unveil a JPY21.3 trillion economic stimulus package, which includes a JPY17.7 trillion in general spending, financed in part by increased government bond issuance. Since Takaichi took office a month ago, Japan’s 10 year government bond yield has risen by 16 basis points to 1.82%, reflecting market concerns about fiscal spending.
Regional FX
Asian currencies remain under pressure against the resilient US dollar, as stronger than expected US nonfarm payrolls reinforced Fed Chair Powell’s hawkish stance that a December rate cut is far from assured. Fed officials echoed this cautious tone: Barr highlighted the need to move carefully with inflation still elevated at 3%, while Hammack stressed that policy must remain restrictive, warning that premature easing could prolong high inflation.
Meanwhile, Taiwan’s export orders rose a robust 25.1%yoy in October, underscoring continued strength in tech demand, though moderating from September’s 30.5% growth. Singapore’s final Q3 GDP print rose 4.2%yoy, higher than the 2.9% advance estimate, pointing to a larger positive output gap. With growth momentum intact, the Monetary Authority of Singapore is expected to maintain its current policy stance, though broad DXY strength could still lead USDSGD to move higher.
Elsewhere, Indonesia’s current account swung to a surplus of USD 4.05bn in Q3, reversing the USD 2.7bn deficit in Q2, thanks to strong exports. Despite this improvement, the rupiah could weaken, with Bank Indonesia’s recent rate hold offering only temporary relief for the currency.
Malaysia’s CPI release later today is likely to reaffirm the country’s favourable growth inflation mix, with inflation expected to remain manageable. This should allow Bank Negara Malaysia to keep its policy rate steady at 2.75% through 2026. Looking ahead, with the Fed expected to lower rates next year, the ringgit is likely to remain relatively resilient.