Week Ahead FX outlook:
Key FX views:
Asia’s data calendar will be led by China, where the combination of trade, inflation and credit figures should highlight the economy’s increasingly uneven growth mix. August exports are expected to remain strong, supported by global demand for AI-related hardware. CPI and PPI inflation could edge slightly higher, partly reflecting energy costs, AI-equipment prices and summer travel demand. In contrast, aggregate financing and new lending are likely to remain weak as subdued household and corporate borrowing offsets relatively resilient government bond issuance. Taken together, the releases may reinforce the divergence between China’s export-oriented sectors and still-soft domestic demand. We continue to expect gradual appreciation in CNY, given strong trade surpluses, exporter conversion, and coupled with the general FX policy direction by Chinese authorities.
Elsewhere, Thailand’s CPI is expected to rise on food and fuel costs but remain within the central bank’s target band, while Malaysia’s industrial production, Singapore retail sales, Taiwan’s trade and inflation data, and South Korea’s GDP and labour-market releases will provide additional signals on regional activity. Among these markets, we see the Bank of Korea remaining hawkish and the GDP numbers should validate that, with some chance also that Taiwan’s central bank may communicate a more hawkish message moving forward. Meanwhile, we expect Bank of Thailand to keep rates accommodative at 1% for some time, and this should continue to anchor the front-end of the THB rates curve.
Outside of Asia, the most important global catalyst is the US August CPI inflation out on 11 September, which comes ahead of the FOMC policy meeting on 16 September. The US CPI inflation print has taken on increasing salience in the near-term, in part from the broader shift by Fed Chair Kevin Warsh to move away from explicit forward guidance – and as such also greater data dependence – and also from Fed Governor Waller’s speech placing meaningful weight on this datapoint in guiding how he will vote in September.
We will also have the ECB policy decision, where consensus and ourselves are expecting a 25bps hike, while in Japan, July labour cash earnings, revised second-quarter GDP, coupled with BOJ Board Member Kazuyuki Masu’s speech could be important catalysts for the market.
The big moves in global FX markets was a sharp strengthening in the Japanese Yen coupled with some dollar weakness
