Peso surges to P57 level on renewed Fed cut hopes
THE PESO rebounded sharply against the dollar on Monday to return to the P57 level after weaker-than-expected US jobs data revived hopes of a September rate cut by the US Federal Reserve.
The local unit closed at P57.29 per dollar, surging by 85.5 centavos from its P58.145 finish on Friday, Bankers Association of the Philippines data showed.
The peso opened Monday’s session stronger at P57.75 against the dollar, which was already its worst showing. Its intraday best was its closing level of P57.29 against the greenback.
Dollars traded fell to $1.69 billion on Monday from $2.54 billion on Friday.
“The dollar-peso closed lower on back of a weak dollar following low nonfarm payrolls data last Friday, strengthening bets of Fed cuts,” a trader said in a phone interview.
Data on Friday showed US employment growth undershot expectations in July while the nonfarm payrolls count for the prior two months was revised down by a massive 258,000 jobs, suggesting a sharp deterioration in labor market conditions, Reuters reported.
Markets are now pricing an almost 90% chance the Fed will ease rates next month owing to the weaker-than-expected jobs data, with just under 60 basis points worth of cuts expected by December, implying two quarter-point cuts and a 40% chance of a third.
The peso gained ground on expectations that Philippine headline inflation eased in July, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Philippine Statistics Authority is scheduled to release July inflation data on Tuesday (Aug. 5). A BusinessWorld poll of 17 analysts yielded a median estimate of 1.2% for the July consumer price index (CPI), within the central bank’s 0.5%-to-1.3% projection.
If met, the July CPI print would be slower than the 1.4% in June and the 4.4% clip in the same month a year ago.
This would also be the slowest in nearly six years or since the 0.6% print posted in October 2019.
For Tuesday, the first trader sees the peso moving between P57 and P57.50 per dollar, while Mr. Ricafort expects it to range from P57.10 to P57.40. — Aaron Michael C. Sy with Reuters
