TWD: USD/TWD Consolidates Above 30.00, Cross Asset Trends Less Supportive
Spot USD/TWD is up modestly in the first part of Thursday dealings. We were last around 30.10, (+0.15% up on end Wednesday levels). Recent lows remain intact at 29.99. Topside focus may rest at 50-day EMA, near 30.17.
- Cross asset trends are supporting a more stable backdrop. US-TW 2yr swap rate differentials have stabilized around the +60bps area. The Fed was dovish on Wednesday but not dovish enough relative to market sentiment going in. US-TW yield differentials were moving lower in the first half of Sep.
- On the equity side, sentiment remains positive, but Taiex gains have slowed, so too have offshore inflows. The outlook remains positive in this space, but some consolidation is not surprising.
- Later on, we have the CBC decision, no change is expected. Indeed, all of the economists surveyed by BBG expect steady rates (currently at 2.00%). Risks are likely tilted towards easing, but given such strong growth in the first half of the year, the CBC arguably has time on its hands to assess downside economic risks.
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CHINA PRESS: China New Energy Truck Sales Up Strongly In July
China’s new energy heavy truck sales reached 16,200 units in July, up 185% y/y, according to data from the Heavy Truck Beidou Operation Network. From January to July, cumulative sales totalled 82,200 units, up 191% year-on-year. Industry experts attributed the increase to national policy support, advances in product technology, improved cost competitiveness and new model launches. Pure electric heavy trucks now account for over 90% of total sales in China’s new energy heavy truck market, said Cai Zilin, chief analyst at Wanlian Securities, in an interview with Securities Daily.
RATINGS: S&P Affirms US AA+ Rating, Keeps Outlook Stable
Headlines have crossed that S&P has affirmed the AA+/A-1 US credit rating, whilst maintaining a stable outlook.
S&P notes: "Amid the rise in effective tariff rates, we expect meaningful tariff revenue to generally offset weaker fiscal outcomes that might otherwise be associated with the recent fiscal legislation, which contains both cuts and increases in tax and spending. We affirmed our 'AA+/A-1+' sovereign credit ratings on the U.S. The outlook remains stable, reflecting our expectation of continued resilience in the U.S. economy; credible, effective monetary policy execution; high, but not rising, fiscal deficits that underpin the increase in net general government debt; and the $5 trillion increase in the debt ceiling." (via BBG, see this link).
AUSTRALIA DATA: Sentiment Improving Towards Neutral As Real Incomes Rise
Westpac’s consumer confidence is trending towards the breakeven 100-level. Sentiment rose 5.7% m/m to 98.5 in August, the highest since February 2022, before the last tightening cycle began. The RBA’s third rate cut this year on August 12 helped to boost confidence but the improvement was not just seen amongst mortgage holders. Governor Bullock also pointed out that further easing is consistent with inflation at the target mid-point.
Australia Westpac consumer confidence
Source: MNI - Market News/LSEG
- Westpac notes that with unemployment low and inflation in the band and signs the consumer is recovering, the RBA can remain cautious. It expects rates on hold in September with a cut in November.
- Deputy Governor Hauser noted in July that disappointing consumption growth may have been impacted by a “scarring effect” as sentiment had remained depressed. This data suggests that may have dissipated.
- The improvement was broad based across components with a particularly strong rise in the assessment of family finances with compared to a year ago +6.2% to 84.2 and expected in a year +5.4% to 106.8, positive territory. Lower inflation & rates as well as wage rises & tax cuts appear to be helping.
- In terms of mortgage rate expectations for the next year, just over 50% of those surveyed post the August RBA decision expect them to be lower.
- The “time to buy a major item” increased 4.2% to 101.7, also suggesting recovering purchasing power, but it remains below the historical average.
- Unemployment expectations improved 2.4% in August, the lowest since May. Westpac observes that it is signalling a “stable labour market”.
- “Time to buy a dwelling” rose 10.5% m/m and 37% y/y, but is still below average. Prices though rose 0.9% to 164.2, close to the series high.
Australia Westpac "time to buy a major item"
