PHP: USD/PHP Lower But Still Close To July Highs, Trade Deficit Remains Wide
Spot USD/PHP sits slightly lower in the first part of Wednesday dealings, last in the 57.20/25 region. This is down around 0.20% versus end Tuesday levels, but we remain close to intra-session highs from yesterday of 57.36. This marked fresh highs in the pair back to late June. The pair is above all key EMAs, with the 200-day support zone close to 57.02.
- Earlier data for June trade figures showed stronger than expected export and import growth. Export growth at +26.1%y/y was the strongest since the first half of 2024, but may reflect front loading before tariff impacts.
- The trade deficit was wider than forecast though at -$3954mn, against a -$3400 expectation and prior -$3632mn. This keeps the trade deficit position broadly steady, albeit up from Q4 lows. The Citi terms of trade proxy for PHP has moved off its recent highs, with recent spike in oil prices likely not helping.
- External deficits should keep PHP sensitive to broader US Fed policy shifts. USD/PHP looks too elevated relative to the recent decline in the US 10yr real yield, but we do have the FOMC later as well as key US data this week, headlined by US NFP on Friday.
- On the local policy front, remarks by BSP Governor Remolona from late yesterday stated that a August rate cut was still on the table (see this BBG link). Two more cuts for this year (including one in August) are possible the Governor stated.
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CHINA PRESS: PBOC To Increase Policy Intensity, Effectiveness
The People’s Bank of China’s Monetary Policy Committee will aim to increase the relevancy and effectiveness of its policies, the Economic Information Daily reported, citing a quarterly MPC meeting. The central bank was still expected to promote RRR and interest rate cuts in H2, following easing in May, given increased export pressure and low price levels, despite officials not mentioning the phrase “a timely reduction of reserve requirement ratio and interest rates”, said Wang Qing, analyst at Golden Credit Rating.
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CANADA: Canada To Rescind Digital Services Tax To Aid Trade Talks
Headlines have crossed that Canada will rescind its digital services tax in order advance trade talks with the US.
- Bloomberg notes: "- Canadian Minister of Finance and National Revenue François-Philippe Champagne says that Canada would rescind the Digital Services Tax in anticipation of a mutually beneficial comprehensive trade arrangement with US, according to a statement."
- Other headlines indicate that trade talks will resume, with a dealing looking to be reached by July 21 between the two countries.
- This follows Trump's announcement towards the end of last week that trade talks between the two countries would be ended due to the digital services tax.
- USD/CAD is down modestly on these headlines, last near 1.3670. Session highs today were at 1.3700.
