Ahead Today
G3: US mortgage applications, eurozone CPI, Germany IFO business climate, Japan trade balance and core machine orders
Asia: Thailand and Indonesia policy rate decisions
Market Highlights
The US dollar weakened after a mixed set of labour market data. Nonfarm payrolls rose by 64k in November, partially offsetting October’s sharp decline of 105k, which was driven by a significant drop in government employment of 162k. Despite the modest rebound, the broader labour market picture remains soft, with the unemployment rate climbing to 4.6% from 4.4% and the underemployment rate increasing to 8.7% from 8.0%. Wage growth also disappointed, as average hourly earnings rose just 0.1%mom, missing market expectations of 0.3%.
Fed Chair Powell acknowledged that the labour market faces significant downside risks, but the latest dot plot continues to signal only one rate cut in 2026. This contrasts with market pricing, which anticipates around two cuts next year.
On the consumer front, resilience persists. US retail sales excluding autos and gas rose 0.5%mom in October, accelerating from 0.1% in September. This suggests household spending remains firm despite labour market softness, providing some support to growth momentum.
In FX markets, USDJPY fell, with yen strength partly driven by speculation that the Bank of Japan could deliver a rate hike at its upcoming meeting. The combination of softer US data and potential BOJ tightening has weighed on USDJPY.
Regional FX
Asian FX performance was mixed against the US dollar, despite a softer dollar backdrop. The Philippine peso led gains, appreciating 0.6% and pulling away from the 59.00 threshold against the dollar. Meanwhile, CNY, MYR, and SGD posted modest advances. Elsewhere, regional currencies weakened, with the Indian rupee hitting fresh lows once again amid the absence of a US-India trade deal and capital outflow pressures.
In Thailand, we expect the Bank of Thailand to cut rates by 25bps today as growth momentum falters. Q3 GDP growth slowed sharply to 1.2%yoy. Inflation remains subdued, giving the BOT room to ease further. That said, a softer DXY has helped to support THB resilience despite weak growth fundamentals and looming election risks.
In Indonesia, we anticipate Bank Indonesia will lower its policy rate by 25bps to 4.50% to bolster domestic demand and credit growth. The recent Fed rate cut and Indonesia’s CPI easing to 2.7%yoy in November provide scope for BI to act. A surprise rate cut, against market expectations for a hold, could weigh on the rupiah.