Eyes on Indonesia's Elections This Week

FX views: MYR and THB had a more noticeable movement last week, e.g. THB depreciated most by about 1.9% against the US dollar. This week, the releases of US’s January CPI inflation, hourly earnings and retail sales numbers, both Singapore’s and Malaysia’s GDP growths in Q4 will move FXs. China market will be closed this week. Pressure on CNY likely resumes after the long Chinese New Year, due to persisting weak economic fundamentals and intensifying deflationary pressure. Having said that, maintaining a stable RMB FXs still is a good strategy for Chinese government to avoid more deterioration in a broader financial market

Week in review: In Asia, Inflation continued to moderate in some countries in January, with Philippines’ headline CPI cooling down to 2.8%yoy from 3.9%yoy in previous month, Taiwan’s headline CPI inflation and core CPIinflation declining to 1.79%yoy and 1.64%yoy from December’s 2.71%yoy and 2.43%yoy respectively. China CPI inflation further worsened to -0.8%yoy in January from December’s -0.3%yoy. This most recent batch of inflation figures adds to the views that with headline inflation falling within inflation target/target ranges for more countries lately, and the continued trend of declining inflations, EM Asia central banks might start to consider start cutting interest rates sooner.

Central bank monitor: RBI kept rates on hold, but disappointed markets by keeping its current tight liquidity stance unchanged. Meanwhile, the Bank of Thailand maintained rates, but the decision was not unanimous, with 2 MPC members voting for a cut. We will have the PBOC’s 1-year MLF rate and the Philippines central bank policy decision up this week.

Week ahead: Markets will focus on US CPI, together with 4Q preliminary GDP estimates for the Euro area. Indonesia will hold its Presidential Elections on 14 Feb, with an election run-off in June a possibility even as Opinion polls show Prabowo as the front-runner (see Indonesia: Election preview). Meanwhile, Singapore will release its FY2024 budget on 16 Feb.

Thailand's CPI inflation was -1.1%yoy in January 2024