Week Ahead FX outlook:
Key FX views:
The key focus in Asia for the week ahead includes US inflation, China’s CPI and credit data, GDP prints out of Singapore, Malaysia, Hong Kong and Taiwan, coupled with the Reserve Bank of Australia’s policy meeting.
In particular, China’s inflation and credit data will set the initial tone. July CPI and PPI are expected to moderate slightly, while aggregate financing growth could be impacted by government-bond issuance and soft private-sector borrowing driven by subdued domestic demand. Meanwhile, the Reserve Bank of Australia is expected to leave its cash rate unchanged at 4.35%, and its statement and updated forecasts will be watched closely to see if the RBA maintains a hawkish bias. India’s July CPI is forecast to rise slightly to around 4.4%yoy with a weak monsoon, and the trade deficit may remain wide amid firm imports. Singapore GDP, Malaysian industrial production and GDP, Hong Kong and Taiwan GDP will provide additional signals on regional growth and price dynamics. In Japan, the BOJ’s Summary of Opinions from its 30–31 July meeting will be closely examined for policymakers’ assessment of inflation, energy costs and the path toward further policy normalization.
Globally, US inflation data will be the principal market catalyst and risk event. July CPI on Wednesday and PPI on Thursday will help determine whether disinflation remains intact and could materially shift Fed rate expectations, Treasury yields and the US dollar; Friday’s retail sales and University of Michigan consumer sentiment will then provide a read on household demand. In Europe, the first estimate of UK second-quarter GDP, together with industrial production and trade data, will clarify the economy’s underlying momentum, while euro-area industrial production and second-quarter GDP will offer a broader assessment of regional growth. Monthly oil-market reports from the IEA and OPEC also warrant attention given the importance of energy prices for inflation, external balances and Asia’s net oil-importing economies.
The South Korean won has outperformed on the back of exporter selling, coupled with spillover from JPY FX intervention.
