THAILAND: People's Party To Back Anutin For PM Role, But With Conditions

The focus of the week will be the Q2 labour market data published on Wednesday. It is expected to show that it weakened in the quarter after some signs of stabilisation in Q1. The unemployment rate is forecast to rise 0.2pp to 5.3% more than the RBNZ’s 5.2% May projection. If the data print as weak as or weaker than the Bloomberg consensus, then a rate cut on August 20 is likely.

• Consensus is forecasting a 0.1% q/q drop in employment driving the annual rate down to -0.9% after -0.7% in Q1. This follows the monthly filled jobs data showing a contraction of 0.3% q/q in Q2. The participation rate is expected to fall 0.1pp to 70.7%. Private wage growth may pick up to 0.5% q/q from 0.4% in Q1.
• RBNZ reported inflation expectations for Q3 are out on Thursday. With the central bank concerned about some recent increase in inflation, the series will be monitored closely ahead of the August 20 decision. The 2-year ahead measure rose 0.2pp to 2.3% in Q2.
• ANZ commodity prices for July are released on Tuesday. They fell 2.3% m/m in June.
• Cotality July home values print late Tuesday night local time. The housing market has been lacklustre over recent months but values rose 0.2% m/m in June. Another positive in July may signal a turning point. 

In the week ending Tuesday July 29th the bias from the leveraged investor base was in favor of the USD. For 6 out of the 8 currencies we saw net USD buying, with JPY and GBP the most prominent. Yen shorts were extended to -31k, the largest since Feb of this year. This in part helps explain Friday's price action, where the yen rebounded strongly in the aftermath of the weaker US NFP report. USD/JPY fell over 2.25% for Friday's session, as yen shorts were potentially cut back. 

• GBP and EUR selling by this segment further trimmed net outright longs for these investors. Aggregate shifts elsewhere for leveraged investors were quite modest.
• In the asset manager space, trends were mixed. The largest shifts came via EUR and GBP selling, but the outright EUR long remains large.
• AUD shorts were curbed, but again this segment remains comfortably net short the A$. 

Table 1: CFTC Positioning - Weekly Change & Outright Positions By Currency & Investor Type 

Source: Bloomberg Finance L.P./MNI 

The BBDXY range Friday night was 1209.31 - 1224.64, Asia is currently trading around 1210. The USD rejected the testing of the 1220/1230 area on Friday and had a knee-jerk reaction lower to the huge move in US rates as the markets view on growth and interest rate cuts is re-evaluated. With US Equities now beginning to look vulnerable to a potential reappraisal of the growth outlook, the USD’s utilisation as a safe haven will again come back into the conversation. While the USD has fallen over 10% this year its role as a safe haven has come squarely into question, should the correction lower in risk begin to expand this premise will again be sorely tested. First support now seen around the 1205 area.

• Otavio Costa on X: “ The yen just recorded its biggest one-day gain against the US dollar since December 2022, when the BoJ loosened its yield curve control and allowed 10-year yields to rise. This isn’t just a one-off move, in my view, it’s part of a broader fiscal survival response. The reality is that both the US dollar and interest rates must come down, in my opinion. This kind of fiscal and monetary adjustment isn’t optional — it’s the last viable path to avoid the US economy hitting a debt wall.”
• Robin Brooks on X: “Friday's revisions to payrolls were huge. Chart shows cumulative 2 month revisions (vertical) vs new "first print" data (horizontal). Revisions removed a June spike in state & local gov't hiring that no one took seriously in the first place. So the Dollar will rebound Monday...” See Fig.1 Below
• Daily Chartbook on X: “In July, retail investors' allocation to stocks rose to the highest (68.3%) since January while bond (15.7%) and cash (16.0%) allocations fell to 4- and 7-month lows, respectively.” 
• There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way.

Fig 1: NFP Print Vs Cumulative 2 Month revision

Source: MNI - Market News/Bloomberg Finance L.P/@robin_j_brooks