Peso may move sideways before data

THE PESO could move sideways against the dollar this week before the release of October Philippine inflation data.

On Thursday, the local unit closed at P58.85 versus the greenback, dropping by 16 centavos from its P58.69 finish on Wednesday, Bankers Association of the Philippines data showed.

Philippine financial markets were closed on Oct. 31 for a holiday.

Week on week, the peso fell by 22.5 centavos from its P58.625 per dollar close on Oct. 24.

For this week, the market could take cues from the October consumer price index (CPI) report to be released on Wednesday (Nov. 5), a trader said in a phone interview.

A BusinessWorld poll of 17 analysts yielded a median estimate of 1.8% for the October CPI, within the central bank’s 1.4-2.2% forecast for the month.

If realized, headline inflation would have picked up slightly from the 1.7% clip in September but slowed from the 2.3% seen in the same month last year.

This would also be the fastest print in eight months or since the 2.1% logged in February.

Still, this would be the eighth month in a row that inflation was below the Bangko Sentral ng Pilipinas’ (BSP) annual 2-4% target.

The market could also react to the European Central Bank’s (ECB) latest policy decision, the trader added.

The ECB kept interest rates unchanged at 2% for the third meeting in a row on Thursday and repeated that policy was in a “good place” as economic risks recede and the euro zone shows continued resilience in the face of uncertainty, Reuters reported.

The ECB has been on hold since cutting rates by a total of 2 percentage points in the year to June. A sanguine assessment from ECB President Christine Lagarde indicates the central bank is in no hurry to change policy, although sources suggest the debate may heat up at its next meeting in December.

Ms. Lagarde argued that Europe’s trade deal with the United States, the Gaza ceasefire and Thursday’s agreement between US President Donald J. Trump and China’s Xi Jinping to trim tariffs had all mitigated downside risks to growth.

“From a monetary policy point of view, we are in a good place,” Ms. Lagarde told a press conference. “Is it a fixed good place? No. But we will do whatever is needed to make sure that we stay in a good place.”

While growth across the 20 countries that use the euro is not spectacular, Ms. Lagarde said she would not complain about the currency bloc’s 0.2% expansion rate in the third quarter, which beat both market and ECB projections.

But while growth risks have abated, she said, the same could not be said for inflation, which the ECB expects to undershoot the target next year. “I think on that front, it’s a more balanced picture,” Ms. Lagarde said.

The ECB will publish its first set of projections for 2028 in December and some policymakers think that clear evidence pointing to a continued undershooting in inflation that year would justify debating a rate cut at the meeting, four sources told Reuters.

But others argued that long-term projections should be taken with a pinch of salt, given their track record, and in any case, a modest undershooting of just 20 basis points (bps) or 30 bps can be tolerated, the sources added.

Financial investors did not materially alter their view on the policy outlook and still see a 40% to 50% chance of one last rate cut by the middle of next year.

Meanwhile, the peso could be supported by the seasonal increase in remittances to finance holiday-related spending, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The trader sees the peso moving between P58.50 and P59 per dollar this week, while Mr. Ricafort expects it to range from P58.60 to P59.10. — AMCS with Reuters