TWD: Spot Supported On Dips, USD/TWD 1mth NDF Up +1%, Implied Vol Higher
Spot USD/TWD has been support on dips so far, with session lows at 31.04 and we were last near 31.10/15, little changed from end Friday levels. The pair is still above all key EMAs, the 200-day near 30.845. Recent highs rest at 31.165. Broader USD sentiment is firmer, particularly against higher beta plays and while equity sentiment is better, we did see large offshore outflows from Taiwan on Friday. The 1 month USD/TWD NDF is up around 1.10%, last 30.85/90, after getting close to 30.30 on Friday as headlines around Taiwan pledging not to manipulate FX crossed. Note the peak to trough move in this pair on Friday was nearly 2.7% (earlier highs were around 31.09).
- The agreement between the Taiwan central bank and the US Treasury pledges to avoid manipulating exchange rates and disclose FX intervention and - importantly - prevent "public investment vehicles such as pension funds" from investing abroad for the purposes of targeting the FX rates. Elsewhere the CBC also hit back at claims from The Economist the the TWD is undervalued and also denied that the US authorities have asked for TWD appreciation.
- Implied vols are higher for USD/TWD spot, last at 9.45% for the 1 month. The market may be wary of a repeat of the sharp move lower in USD/TWD that we saw earlier this year in May, where we fell from around 32.50 to sub 30.00 in short order (amid suspected increased hedging, exporter USD selling). UBS doesn't expect a repeat though, “Near-term market focus will be on smoothening — no paradigm shift likely in our view,” they wrote. “UBS sees USD/TWD at 30 by end-2025, then grinding back to 31 in the first half of 2026.” (via BBG).
- Friday saw just over $1.9bn in offshore equity outflows (the largest daily outflow since Aug 20 this year), with tech/AI valuation concerns still weighing. This has pushed Taiwan back into a net equity position for 2025 to date. In the past trading month net equity outflows are now close to $10bn.
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LOOK AHEAD: US Week Ahead Headlined By Delayed CPI Report On Friday
- The September US CPI report will be released on Friday, delayed amidst the government shutdown but with the BLS making a special exception on social security payment considerations.
- Bloomberg consensus looks for headline CPI inflation at a rounded 0.4% M/M after 0.38% back in August and for Y/Y inflation to firm two tenths to 3.1% for what would be its highest since May 2024.
- Core inflation is seen at a rounded 0.3% M/M after 0.35% in August (exceeding the median unrounded estimate of 0.31%) and 0.32% in July. It’s expected to see core CPI inflation hold at 3.1% Y/Y having in August increased to its highest since February.
- Core details should see focus on both goods and services angles: underlying goods inflation has clearly firmed in recent months on tariff pressures although the median increase has currently seen a peak back in June, whilst services will be watched for any spillover after some strong recent non-housing readings.
- The report will come within the FOMC blackout period ahead of the Oct 28-29 decision, with a 25bp cut fully priced and likely needing a large surprise to alter this.
- As for broader inflation details, Fed Chair Powell this week confusingly suggested that we will have the September PPI report but the BLS had previously said “No other releases will be rescheduled or produced until the resumption of regular government services”.
US DATA: Latest Jobless Claims Estimates During The Shutdown
As noted earlier, MNI estimates initial jobless claims at a seasonally adjusted 218k in the week to Oct 11 and continuing claims at a seasonally adjusted 1929k in the week to Oct 4.
- To give a better idea of sensitivity around these estimates, which rely on estimates for some missing states, we note the below analyst estimates:
- Goldman Sachs have a central estimate of 217k for initial claims in a range of 211-225k, whilst they see continuing claims at 1917k in a range of 1885-1930k.
- JPMorgan meanwhile also see 217k for initial claims whilst they see continuing claims as having held constant at 1927k.
NATGAS: Venture Global in Talks with Ukraine for more LNG Deliveries, Reuters
Ukraine is seeking more cargoes from Venture’s Plaquemines facility as the embattled nation approaches the winter heating season, according to Reuters sources
- Venture is in talks with Ukraine’s DTEK to procure more LNG cargoes after a year of gas infrastructure attacks by the Russians.
- Venture Global CEO Michael Sabel met with President Volodymyr Zelenskiy on Thursday October 16.
- DTEK signed an agreement in 2024 for an undisclosed amount of LNG from the facility, as well as 2 mtpa from Calcasieu Pass Phase 2 currently under construction.
- Plaquemines currently has spare capacity to deliver more cargoes to Ukraine on the spot market, per Reuters.
- Plaquemines now sends out the second highest LNG volume in the US, with feedgas demand averaging 3.45 bcf/d according to MNI figures.
