Ahead Today
G3: US initial jobless claims, JOLTS job openings; ECB policy rate decision
Asia: CPI data from Thailand, Taiwan, and Philippines, Indonesia GDP, Singapore retail sales
Market Highlights
The US dollar index (DXY) held firm overnight, while the yen stayed under pressure ahead of Japan’s 8 February election. USDJPY has retraced more than half of its decline after the recent sharp fall from around the 159.00 level to the 152.00 level. Oil markets also saw heightened volatility: initial reports that Iran-US talks scheduled for Friday had been cancelled drove crude prices sharply higher, but the move eased after Iran clarified that the bilateral talks would proceed. This highlights the fragility of current diplomatic channels, with Tehran insisting discussions remain narrowly focused on nuclear issues while Washington continues to pursue a broader agenda. Elevated geopolitical risks continue to provide support for oil prices.
US macro data took on a slightly softer tone but still pointed to underlying resilience in the economy, even as labour market momentum weakens. ISM Services held steady at 53.8, comfortably in expansion territory, though both new orders and employment softened. Meanwhile, the ADP report showed slow hiring, with private payrolls rising just +22k in January, less than half of consensus expectations and below December’s +37k. Market expectations for the Fed remain little changed, with about 50bps of rate cuts (two cuts) still priced in for this year.
Asian currencies were slightly weaker against the USD in yesterday’s session. In particular, yen weakness (-0.7%) and higher oil prices likely created negative spillovers across the region, with the Korean won notably leading losses, falling 0.8% against the US dollar.
In Asia, the data flow remains centred on inflation and growth. Indonesia’s Q4 GDP print is expected to show growth of around 5%yoy. With inflation rising to 3.55%yoy in January, above Bank Indonesia’s 1.5%-3.5% target range, the central bank is likely to keep rates on hold in February. BI’s near term priority also appears to be maintaining rupiah stability.
Thailand’s deflation trend is likely to persist, giving the Bank of Thailand room to cut rates this month. The baht has also come under pressure from softer gold prices and uncertainty ahead of the 8 February election. Meanwhile, the Philippines’ contained inflation backdrop should continue to provide some support for the PHP.