THB: USD/THB Testing Above 50-day EMA Resistance
USD/THB is up in the first part of Wednesday dealings, last near 32.60. This is fresh highs back to the start of August. It also puts the pair just above its 50-day EMA resistance point. Moves above this resistance point in June and late July/early August weren't sustained and ultimately proved selling opportunities in the pair. Note the 100-day EMA is further north at 32.88.
- Broader USD sentiment has been positive in recent sessions, with some nervousness creeping in ahead of Powell's speech later this week at Jackson Hole. Uncertainty around Fed rates is supporting the dollar and weighing on equity market sentiment (another USD positive).
- For USD/THB we are tracking the gold price, in an inverse fashion, fairly closely, see the chart below. Softer gold is also consistent with a firmer USD backdrop, although broader ranges for the BBDXY index and gold continue to hold.
- Locally, via BBG: "Thai commercial banks saw their outstanding loans contract for a fourth consecutive quarter as lending to small businesses and consumers was crimped by heightened credit risks amid forecasts of an economic slowdown." (See this link). Also note: "Acting Prime Minister Phumtham Wechayachai chairs an economic stimulus committee meeting at 2:30pm (via BBG).
- The SET equity index is off recent highs, with offshore investors selling both local equities and local bonds, which is likely adding pressure to THB at the margins.
Fig 1: USD/THB Versus Gold Spot Prices (Inverted)
Source: Bloomberg Finance L.P./MNI
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JAPAN: Ishiba Removal Odds Off Recent Highs
The chart below plots the Polymarket odds of Japan PM Ishiba being the first leader to be removed in 2025. We remain elevated but off recent highs. The trend was mostly been firmer in the lead up to the weekend upper house election results, which saw the LDP coalition lose its majority. This was expected in terms of the opinion polls prior to the outcome.
- Focus will be on whether Ishiba is able to stay in the PM role. Bloomberg notes: "The last three LDP prime ministers who lost an upper house majority stepped down within two months, including Shinzo Abe in 2007 during his first stint as premier." But adds: "The opposition is split among roughly a dozen parties that are too fractured to pull together any kind of stable alternative if it brings a no-confidence vote against Ishiba, meaning the LDP will probably trudge along by cutting deals to cobble together support on an issue-by-issue basis."
- BBG also noted that the leader of the main opposition part, Noda of the CDP would hold a press conference later today (after seeing what PM Ishiba stated at his press conference. Noda could submit a no confidence motion in Ishiba. Note the upper house doesn't have the power to remove Ishiba.
- If PM Ishiba does stay on, which he reiterated that intends to in remarks post this result, focus will be on how policy is formed, with more pressure likely on greater support for cost of living relief for households.
- Opposition parties that campaigned on this issue generally fared better in Sunday's upper house elections. The extent to which this could drive further fiscal slippage. Given the steepness of the yield curve, with the 2/30's around +230bps and at multi decade highs, fresh policy uncertainty/fiscal slippage is arguably already priced by the market to some degree though.
- Note Japan markets are closed today, returning tomorrow.
Fig 1: Polymarket: - Ishiba To Be The First Leader Out In 2025
Source: Bloomberg Finance L.P./MNI
CHINA PRESS: Strong H1 Economic Results Provides Space For H2 Reforms - Guan Tao
China’s strong economic performance in H1 puts the annual growth target well within reach and gives officials space to prioritise structural reforms in H2, rather than new macro economic measures, according to Guan Tao, former senior official at the State Administration of Foreign Exchange. While the trade-in programme has delivered notable results, Guan said that efforts to sustainably boost consumer demand require reforms aimed at improving residents’ expectations for permanent income and strengthening overall consumption capacity.
