THAILAND: Confidence Consistent With Slowing Growth, BoT Likely To Cut
The University of the Thai Chamber of Commerce consumer confidence measure for September was little changed rising slightly to 50.7 from 50.1 with the economic assessment at 44.4 after 44.1. The quarterly averages have been moderating for over a year and Q3 suggests that consumption growth slowed further after moderating 0.4pp to 2.1% y/y in Q2. The slowing growth outlook while inflation holds below the bottom of the Bank of Thailand’s 1-3% target band should drive another 25bp rate cut to 1.25% today (see MNI BoT Preview). This is the first meeting for new Governor Vitai who wants to support growth.
Thailand private consumption
- Consumer confidence has been impacted by recent political instability with it falling in August to its lowest level since December 2022. Weak income growth and a drop in tourist arrivals have also weighed on spending.
Thailand tourist arrivals
- Fiscal support worth $1.36bn was approved this week to subsidise household essentials and is to be distributed between 29 October and 31 December and may boost confidence in coming months. Around 20mn Thais will qualify for the THB 2000 payment and the government expects the plan to boost growth by 0.3-0.4pp. Elections are due before April and this looks like a sweetener for voters.
- The slight pickup in consumer confidence was driven by a 1.5 point improvement in the outlook to 58.7 while the assessment of present conditions remained depressed falling 1 point to 34.4.
- Even though labour market conditions only rose 0.2 to 48.5, there was an improvement in future income sentiment to 59.3 from 58.0.
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FOREX: Asia FX Wrap - The USD Support Continues To Hold For Now
The BBDXY has had a range of 1202.47 - 1204.11 in the Asia-Pac session, it is currently trading around 1203, +0.10%. The USD was again surprisingly able to shrug off the extension lower in US yields and found solid demand below 1200 helping it keep the support in place for now. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows.
- EUR/USD - Asian range 1.1704 - 1.1721, Asia is currently trading 1.1715. The pair bounced on Friday in response to the NFP but momentum stalled into the close. EUR trades firmly within its wider 1.1350-1.1850 range with a bias to the topside.
- GBP/USD - Asian range 1.3483 - 1.3506, Asia is currently dealing around 1.3495. The pair bounced strongly off its support around 1.3350 last week. The move above 1.3500 on NFP has stalled but price is now back in the middle of its 1.3350-1.3650 range. A sustained break below 1.3350 is needed to open up a move back to 1.3100.
- USD/CNH - Asian range 7.1244 - 7.1283, the USD/CNY fix printed 7.1029, Asia is currently dealing around 7.1325. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
- Cross asset : SPX +0.10%, Gold $3581, US 10-Year 4.10%, BBDXY 1203, Crude Oil $62.58
- Data/Events : EZ Sentix Investor Confidence, Germany Industrial Production/Trade Balance
Fig 1: BBDXY Spot 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
NZD: Asia Wrap - NZD/USD Consolidates Around 0.5900
The NZD/USD had a range of 0.5883 - 0.5904 in the Asia-Pac session, going into the London open trading around 0.5900, +0.12%. The NZD pushed higher in reaction to the NFP but found good selling above 0.5900 capping the move for now. This 0.5900-0.5950 area presents a good opportunity to fade for those who are bearish the NZD, but the caveat to this trade remains the USD’s ability to not break down. CFTC Data shows light positioning in a market that is struggling for a strong trend.
- Q2 manufacturing data print Tuesday including volumes. Manufacturing volumes rose 2.4% q/q in Q1. Q2 GDP prints on September 18, which the RBNZ expected to fall 0.3% q/q in its August projections.
- Bloomberg - “Dollar Vulnerability Turns to Downtrend on Payroll Miss. Further dollar weakness looks inevitable, with soft jobs data and falling rate expectations reinforcing the case for sustained downside. Together, easier Fed policy and the potential return of passive hedging flows create a feedback loop that makes sustained dollar strength increasingly difficult to justify.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5800(NZD515m Sept 10), 0.5870(NZD320m Sept 10) - BBG
- CFTC Data of last week shows Asset Managers added slightly to their new short position in the NZD -5127(Last -4743), the Leveraged community have completely exited their short and have turned a fraction long +285(Last -225).
- AUD/NZD range for the session has been 1.1115 - 1.1133, currently trading 1.1120. The Cross is consolidating above 1.1100, dips back towards 1.1000/1.1050 should be supported now.
Fig 1: NZD CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
JGBS: Futures Off Friday Highs, Swap Rates Higher For 20-40 Yr
JGB futures sit at 137.98, +.02 versus settlement levels in latest dealings. We are away from Friday highs (138.37), but dips under 138.00 have been support so far today.
- Focus remains on who will be the new PM, after Ishiba decided to step down over the weekend. Local media report that the leadership election may be held on Oct 4 (per TBS via BBG). An official announcement is expected tomorrow. A number candidates are likely to put their names forward.
- When Ishiba secured the PM position last Oct, the runner up was Sanae Takaichi. Via ABC news: "A Nikkei survey held at the end of August put Ms Takaichi as the most "fitting" successor to Ishiba." Takaichi could arguably generate the most significant market reaction if she is successful becoming the new PM, as she has been outspoken in terms of being more dovish in terms of the BoJ outlook and looking to boost fiscal spending. Former Minister, Toshimitsu Motegi, will reportedly run.
- Earlier on the data front, we had Q2 GDP revisions, which were firmer than market expectations. Stronger private consumption offset weaker capital investment the data showed.
- The cash JGB 2/30s curve is steeper, but away from session highs (+245bps) We were last +243bps. The outright 10yr yield is little changed, last near 1.575%.
- In the swap space, the move in 20-40yr rates has been larger than the cash JGB yield move. The 30yr is up around 5bps, last near 2.52%.
- Tomorrow on the data front, we have August money stock figures and August machine tool orders.
