Ahead Today
G3: US mortgage applications, trade balance, FOMC minutes; eurozone CPI
Asia: Malaysia trade, BI policy rate decision, Philippines BOP
Market Highlights
The US dollar continues to show resilience in the near term, amid heightened volatility across US equity markets. Both the S&P 500 and NASDAQ indices closed lower. Nvidia’s earnings announcement will also be closely watched. With AI valuations increasingly under scrutiny, this earnings release could be a key event risk for broader market sentiment.
Fed’s Barkin also added to the cautious sentiment, stating that the central bank’s dual mandate of stable inflation and maximum employment remains under pressure. He noted that inflation is still elevated, though consumers appear to resist further price increases. Initial jobless claims came in at 232,000 for the week ending October 18, a level that remains historically low. But the ADP employment report showed US firms shed an average of 2,500 jobs per week in the four weeks to November 1, though this marks an improvement from the prior week’s average of -14,250 jobs.
Upcoming data will be critical in shaping rate-cut expectations. The delayed September employment report due on November 20 could be a catalyst for a USD reversal if it delivers a huge negative surprise, while the PPI release on November 25 could provide clarity on inflation dynamics. Rates volatility has notably risen in November.
In Japan, monetary policy and FX developments remain in focus. BOJ Governor Ueda said that the central bank is gradually adjusting the degree of monetary easing and will remain data-dependent in its policy decisions. He also stressed cooperation with the government in monitoring FX moves and their impact on the economy. Finance Minister Katayama strengthened warnings about currency moves as USDJPY broke above the 155.00 level.
Regional FX
The US dollar’s near-term strength remains intact, keeping most Asian currencies under pressure. However, risks are building around upcoming US employment data, which could challenge the dollar’s resilience if a significant downside surprise emerges. At the same time, yen weakness continues to help reinforce dollar strength, driven by shifts in domestic policy dynamics and a diplomatic row with China that threatens to dampen inbound tourism from Chinese visitors. Equity market volatility and concerns over lofty AI-sector valuations further contribute to fragile risk sentiment across global markets.
The Indonesian rupiah is likely to remain an underperformer among regional peers, weighed down by net foreign bond outflows. Since September, these outflows have nearly erased all the net inflows accumulated during the first eight months of the year, underscoring the currency’s vulnerability. Against this backdrop, we expect Bank Indonesia to keep its policy rate unchanged at 4.75% in today’s meeting. Governor Warjiyo has recently emphasized that any future rate cuts will hinge on rupiah stability and the effectiveness of monetary policy transmission, signalling a cautious stance in the face of external pressures.