Week Ahead FX outlook:
Key FX views:
Next week, global and Asian FX markets will navigate a slow start due to major bank holidays followed by high-impact monetary policy updates from the US and Oceania. Markets will closely analyse the minutes from the Federal Reserve's January meeting to gauge the likelihood of a March rate cut. Any hawkish signals could strengthen the USD, putting renewed pressure on Asian peers like the JPY and CNY. RBNZ is expected to hold the official cash rate at 2.25%. While New Zealand faces cooling inflation, the central bank has shifted toward a data-dependent stance, likely causing volatility for the NZD. In Asia, for People's Bank of China (PBOC) meeting on Feb 20, investors will watch for further monetary easing measures to combat structural slowdowns. The PBOC has recently pledged to maintain a "moderately loose" policy to support domestic demand, which could keep the CNY at the lower end of its trading range.
If the FOMC minutes suggest that the Fed is in no rush to cut rates, Asian currencies could face some downside pressure. In addition, the January US CPI report will be released on February 13 (US time) and is likely to be a key driver for USD/Asia pairs next week. A CPI print exceeding market expectations may trigger some hawkish repricing of Fed rate‑cut expectations, which could stall recent strength seen in Asian currencies. The JPY and CNY remain sensitive to US yield movements. The AUD and NZD also face a critical week, where domestic labour data and the RBNZ decision are in focus. Major Asian economic data next week may shed light on growth stability in Southeast Asia and inflation trends in Japan. Thailand will report Q4 GDP and Philippines policy rate decision is scheduled on Feb 19. The BSP is widely expected to cut its policy rate by 25bp to 4.25%. Such a move could weigh on the PHP in the near term due to reduced FX carry appeal, as the central bank prioritises growth over inflation, which has remained within the BSP inflation target band.
