ASIA FX: USD/KRW Drifts Higher Amid Tariff Concern, THB Outperforms
Jul-14 05:14
The bias in USD/Asia pairs has been to gravitate higher in the first part of Monday trade. This mirrors some of the moves seen in the majors space, where higher beta plays like NZD and AUD have underperformed. Equity futures for US and EU markets are weaker, following weekend tariff threats on the EU and Mexico from US President Trump. There are also reports that Trump may expand US support to Ukraine, including offensive weapons. Regional Asia Pac equities aren't see much fallout at this stage though, with some markets in SEA up close to 1%.
- USD/CNH is little changed, last holding close to 7.1700. The USD/CNY fixing edged higher but remained sub 7.1500. June trade data was slightly better than forecast, with export growth close to 6%y/y, while import growth rebounded more than forecast. The trade surplus was also wider than forecast. Market impact from the data was negligible.
- Spot USD/KRW has risen towards 1380 in line with the risk off tone seen in the majors. We aren't too far away from the 50-day EMA resistance point (.The Kospi is still rallying, amid continued positive sell-side view points. Earlier the South Korean trade minister stated it may be possible to reach an 'in principle' trade agreement by Aug 1, with progress made around discussions on key industrial sectors (per RTRS).
- USD/TWD spot is little changed, last still holding above 29.20. USD/HKD spot remains just under the top end of the peg band near 7.8500.
- In SEA, USD/PHP is up around 0.30%, last near 56.65/70, while USD/IDR is up by 0.20%, the pair close to 16245 in latest dealings. We remain within recent ranges for both pairs. USD/SGD is up at 1.2815, slightly weaker in SGD terms, despite a Q2 GDP beat.
- USD/THB is bucking these trends, the pair last in the 32.40/45 region (up around 0.20% in THB terms), close to recent lows near 32.30. Headlines cross earlier of "*THAILAND PREPARING 200B BAHT SOFT LOANS FOR TARIFF-HIT FIRMS" (via BBG), which may be aiding local equity market sentiment. The tourism arrivals estifor 2025 was cut too 35mln from 40mln, although some slowing has already been evident in recent months.
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US FISCAL: Available Extraordinary Measures Pick Up Ahead Of Tax Date
Jun-13 20:42
Treasury had $144B in "extraordinary measures" available to keep the government financed as of June 11 per a release Friday. That is up from $84B a week earlier and the highest since April 28.
- However, TGA cash continues to fall, to $309B latest (lowest since early April) Combined with a pullback in Treasury cash ($376B), keeping the total resources available to avert an "x-date" in the summer at around $450B .
- There will be another uptick in Treasury cash in the coming days, and it's likely Treasury allowed some of the extraordinary measures to be rebuilt (ie not exercised) in anticipation of more cash coming in.
- This is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
FED: Two Cuts Priced This Year Headed Into FOMC Week
Jun-13 20:28
As we head into the June Fed meeting week, market pricing is reflective of the FOMC’s messaging (that we describe in our preview):
- The next cut is only fully priced by the October FOMC meeting, with September seeing a roughly 80% implied probability of bringing the next 25bp reduction.
- Exactly 50bp of cuts are priced through end-2025, implying two Q4 cuts.
- That’s a shift from just after the May meeting, after which the next cut was fully priced by September, and there were closer to three cuts priced for the rest of the year.
- Overall cuts are seen backloaded this year (after 15bp in September, 29bp of cuts priced in Q4 - Oct/Dec combined), but falls off in Q1 (just 21bp cuts priced, 9bp of cuts priced for January and 12bp for March)
FED: Summary Of Economic Projections: Higher 2025 Inflation, Weaker Growth
Jun-13 20:21
The MNI Markets Team’s expectations for the updated Economic Projections are below.
- As of the May meeting, the Federal Reserve staff – whose outlook tends to be broadly shared by the median Committee member – revised their forecasts for growth weaker in 2025 and 2026, “as announced trade policies implied a larger drag on real activity relative to the policies that the staff had assumed in their previous forecast. Trade policies were also expected to lead to slower productivity growth and therefore to reduce potential GDP growth over the next few years. With the drag on demand expected to start earlier and to be larger than the supply response, the output gap was projected to widen significantly over the forecast period. The labor market was expected to weaken substantially, with the unemployment rate forecast moving above the staff's estimate of its natural rate by the end of this year and remaining above the natural rate through 2027."
- On inflation, "The staff's inflation projection was higher than the one prepared for the March meeting. Tariffs were expected to boost inflation markedly this year and to provide a smaller boost in 2026; after that, inflation was projected to decline to 2 percent by 2027."
- Our expectations for these changes fall somewhere in between those projections and the March SEP – a slightly higher unemployment rate, substantially higher inflation in 2025 but to a lesser extent in 2026, and weaker GDP growth this year. Longer-run variables should be unchanged.
MNI Markets Team Expectations For June 2025 Summary Of Economic Projections Medians
