Week Ahead FX outlook:
Key FX views:
Asia’s calendar is busy and likely to be dominated by three themes: China’s growth pulse, the regional inflation spillover from higher oil prices, and whether central banks need to lean more hawkish. China’s official PMIs and RatingDog manufacturing PMI will be watched for both potential export resilience and whether soft domestic demand continues. South Korea’s trade data should remain a bright spot, with exports expected to accelerate further on AI-related semiconductor demand, but the more market-sensitive releases may be the CPI prints across Korea, Indonesia, Taiwan, the Philippines and Thailand, which are expected to show inflation picking up as fuel costs and weaker currencies feed into import prices and second-round effects such as food and services prices.
The Philippines CPI release on June 5 will be especially important for PH rates and FX markets, given it could help determine whether the BSP delivers a jumbo rate hike at or even before its June 18 policy meeting. This matters because BSP Governor Remolona has already signalled that policymakers are considering another hike, potentially off-cycle. Overall we see BSP hiking rates by another 75bps in 2026, bringing the policy rate to 5.25%, with a good chance of a jumbo 50bps hike in June. South Korea’s CPI, while a smaller focus than the Philippines, will also be important after the BOK’s hawkish hold: the latest dot plot showed most policy-rate projections pointing to hikes over the next six months, with 10 of 21 dots at 3.00%, seven at 2.75%, and only two at the current 2.50%. A stronger Korean CPI print would reinforce the case that the BOK may need to deliver on its hawkish tone, particularly given higher oil prices, South Korean Won weakness, housing-market concerns and firmer growth forecasts.
In India, the RBI decision on June 5 will be closely watched. While consensus expects the RBI to remain on hold, we see a good chance the central bank delivers a 25bps rate hike this upcoming meeting. Overall, we expect the RBI to hike rates by at least 50bps this fiscal year, taking the terminal repo rate to 5.75%, with hikes potentially coming sooner rather than later as policymakers seek to shore up INR, manage inflation expectations, and respond to a more challenging balance-of-payments backdrop.
We forecast RBI delivering at least 50bps of hikes this year
