Written by Steven Dooley and Shier Lee Lim
China rate decision critical today
With US markets closed for the Presidents’ Day holiday, the focus today is on the key People’s Bank of China policy decision with some forecasters looking for a cut in interest rates to boost economic activity.
While the one-year loan prime rate is expected to remain at 3.45%, market expectations are looking for a cut from 4.20% to 4.10% in the five-year policy rate.
The loan prime rate decision is due at 9.15am local time (12.15pm AEDT).
Any cut might be supportive for regional FX markets after a moderately good start to the week.
Overnight, the AUD/USD gained 0.1% while the NZD/USD jumped 0.4%.
The USD/CNH gained 0.1% while the USD/SGD was flat.
Eurozone wages key for ECB
Eurozone wages look likely to remain hot. Salary growth will pick up speed in Q4 2023, rising from 4.7% to 4.9%. This is predicated on 83% of previously published country-level statistics.
The average new contract signed in Q4 2023 was over 5% year over year, which the ECB confirmed and which suggested that there would be some near-term persistence in pay increase that is negotiated. Leading signs, however, suggest that wage growth is probably going to continue into mid-2024. We still have a negative stance on the euro, believing that it is better utilized as a funder and that it will eventually lose value in relation to the USD.
Malaysia trade balance due
The Malaysian goods trade surplus is predicted to decrease somewhat from MYR 11.8 billion in December to MYR 10 billion in January. Amidst persistently low external demand, notably from China, export growth most likely improved to -4.1% y-o-y in January from -10.0% in December.
This improvement was largely attributable to increased commodity prices, particularly for palm oil. It is anticipated that import growth would somewhat increase, from 2.9% to 3.2% y-o-y, in line with the manufacturing PMI improvement.
In order to establish a positive feedback loop in exporter conversion trends, we must see tailwinds to the balance of payments to drive MYR gains.
Regional FX gains ahead of PBOC
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 19 – 23 February
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
