Ahead Today
G3: Germany industrial production
Asia: Taiwan CPI, Vietnam CPI and trade, BNM policy rate decision
Market Highlights
USDJPY climbed above 154.00 level again, after finding near-term support at the 153.00 level, US 10-year Treasury yields moved higher by more than 8 basis points, while US equities rebounded. These follow stronger than expected US macro data released yesterday. The US ISM services index rose to 52.4 in October, from 50.0 in September, beating Bloomberg consensus of 50.8. Within the index, components such as prices paid, new orders, and employment showed improvement from the prior month, although the employment sub-index remained in contraction territory.
The ISM services data has reinforced positive market sentiment stemming from the ADP employment report. ADP employment rose 42,000 in October compared to. a 29,000 fall in September, beating Bloomberg consensus forecast of 30,000.
Meanwhile, news reports suggest the US Supreme Court is skeptical about the legality of President Trump’s sweeping global reciprocal tariffs, with a verdict potentially due by end of year. If these tariffs are deemed unlawful and subsequently revoked, it could help bolster growth prospects and support FX performance across the Asia region. Moreover, in light of shifting trade dynamics, Asian economies are working to enhance supply chain resilience. China has notably diversified its exports away from the US, with notable increases in shipments to Africa and ASEAN economies.
Regional FX
The key macro data highlights today include Bank Negara Malaysia’s (BNM) policy rate decision and October CPI data from Taiwan and Vietnam.
We expect BNM to keep the overnight policy rate unchanged at 2.75%, given favourable growth-inflation dynamics. Malaysia’s economy is likely to still show resilience in Q3, supported by investment and output. Industrial production rose 4.9%yoy in August from 4.2% in July, while growth in approved investments in both the services and manufacturing sectors have remained robust. A narrowing policy rate gap with the US will be supportive of the ringgit.
Meanwhile, Thailand’s economy remains entrenched in deflation, with CPI falling 0.76%yoy in October, a deeper decline from -0.72%yoy in September and coming in below market consensus of -0.70%yoy. This will likely leave room for further BoT easing, containing THB’s appreciation. Indonesia’s Q3 GDP slowed to 5.04%yoy, from 5.12%yoy in Q2. Private consumption growth eased to 4.87%yoy from 5.04% in Q2, However, net exports contributed about 2.2ppt to GDP growth in Q3. Exports rose 9.9%yoy, driven by strong shipments to the US, outpacing import growth of 1.2%yoy.