Week Ahead FX outlook:
Key FX views:
Asia’s economic calendar will be headlined by China’s official PMIs, which are expected to show continued weakness in manufacturing amid overcapacity curbs, some temporary factory shutdowns, and negative impact from tariffs. China’s non-manufacturing PMI activity may see a modest rebound, supported by summer travel and construction. Japan’s wage data is anticipated to reflect stronger growth, reinforcing expectations for a BOJ rate hike in October. We expect Malaysia’s central bank to keep rates on hold, while South Korea’s export data for August is likely to slow on the back of emerging impact and payback from tariff imposition and earlier front-loading. In Indonesia, ongoing protests over planned increase in housing allowances for lawmakers have weighed on sentiment and contributed to recent rupiah weakness. Assuming protests do not escalate, we still expect modest IDR appreciation supported by Fed rate cuts, resilient growth, and improved liquidity.
On the global front, the US August payrolls report will be the most important indicator. A weak NFP print will likely further raise expectations for Fed rate cuts not just in September but more broadly heading into 2026. Meanwhile, the Fed’s Beige Book and speeches from regional Fed presidents will provide further insight into economic conditions. In Europe, CPI and retail sales data will be released alongside remarks from ECB President Lagarde. China also hosts the Shanghai Cooperation Organization summit in Tianjin, drawing leaders from Russia and India, while a high-profile military parade in Beijing will showcase new weaponry with attendance from Xi Jinping, Putin, and Kim Jong Un. It is still unclear whether India’s Prime Minister Modi and China’s President Xi will eventually meet on the sidelines of the SCO, but in the event they do, it is likely to also be accompanied by announcements perhaps including resumption of flights between the two countries. The current nascent détente between the Elephant and the Dragon is of course tentative, and one catalysed by external factors such as tariffs from the Trump administration. Nonetheless, any signs at the margin of improving ties could go a long way to stabilising the relationship between the two largest countries in Asia.
Chips over alcohol? CNH strengthened as onshore sentiment improved partly with a tech and semiconductor rally
