Ahead Today
G3: US trade balance, speech by Fed’s Bowman
Asia: -
Market Highlights
The broad US dollar index (DXY) held on to their recent gains, despite a weaker than expected ISM manufacturing PMI reading. The ISM manufacturing PMI declined to 48.7 in October (below 50 indicates contraction), down from 49.1 in September and below the market consensus of 49.5. The weaker print marks the eighth straight month of contraction in factory activity. Breaking down into components, the ISM employment sub-index remained in contractionary territory, but it picked up to 46.0 in October from 45.3 in September, reflecting a slower pace of decline. The ISM new orders sub-index also picked up to 49.4, from 48.9. Meanwhile, the ISM prices paid index fell to 58.0, from 61.9, reflecting an easing of input cost pressures.
In terms of Fed speak, the views among policymakers remain divisive. Fed’s Miran said that monetary policy remains restrictive, and he will continue to advocate for outsized rate cuts. Fed’s Daly signalled that the Fed has to be open about the possibility of another rate cut in December, citing the need to support labour market while balancing the risk of inflation, which remains above the Fed’s 2% target. However, Fed’s Goolsbee is more concerned about inflation than the labour market.
Regional FX
Asian currencies were modestly weaker against the US dollar yesterday. USD momentum has continued to build to the upside, with USDSGD breaking above the 1.3000 resistance level.
China’s RatingDog (formerly Caixin) manufacturing PMI fell to 50.6 in October from 51.2 in September. This was driven by new orders falling at the fastest pace since May. However, factory activity remained in expansion territory for the third consecutive month, lending continued support to the Chinese yuan.
Meanwhile, Indonesia’s headline CPI accelerated to 2.86%yoy, higher than market expectations of 2.6%yoy, driven by food price inflation and a modest pickup in core inflation. USDIDR has traded to the highest level in 8 trading days, with the upside CPI surprise adding to downside bias on rupiah. On a positive note, Indonesia’s trade data also beat market expectations. Exports rose 11.4%yoy vs. market consensus of 7.4%yoy, nearly doubling September’s pace, while imports rebounded sharply to 7.2%yoy from -6.6%yoy. This resulted in a trade surplus of $4.3bn in September, widening from $3.2bn from a year ago. Bank Indonesia still sees room for rate cuts, but it signals that further cuts will depend on rupiah stability and policy transmission.