THE PESO will likely move sideways against the dollar this week amid the greenback’s sustained weakness on the back of mixed US economic data as well as some tightening moves from the European Central Bank (ECB).
On Friday, the peso moved sideways against the dollar as it lost four centavos to close at P50.40. This was due to bargain-hunting seen in the afternoon session despite softer US producer prices data and hawkish remarks from the December meeting of ECB policy makers.
“The dollar might depreciate this week against the peso, sustaining its weakness last Friday evening amid speculations of some tightening moves from the European Central Bank (ECB) this year,” Guian Angelo S. Dumalagan, market economist of Land Bank of the Philippines, said in an e-mail over the weekend.
Minutes of the December meeting of ECB published on Thursday hinted that the monetary authority is preparing to gradually cut its stimulus program in line with increasing confidence amid the global economic recovery.
Mr. Dumalagan said the greenback might move downwards in the first three days of the week on the back of the mixed US economic data released on Friday night.
“While US core inflation picked up in December 2017, headline inflation and retail sales showed slower readings, supporting views of a gradual pace of US interest rate normalization in 2018,” Mr. Dumalagan noted.
The US consumer price index — the measurement used to calculate core inflation — rose 0.3% in December in a comparable month-ago period, topping analysts’ expectations.
However, US retail sales grew weaker than expected, standing at 0.4% in December from the 0.5% estimates. Stronger retail sales in December was due to strong consumer demands during the holiday season.
“Towards the end of the week, there might be sideways movement for the dollar amid mixed signals abroad,” Mr. Dumalagan added.
US Federal Reserve officials Robert S. Kaplan, Charles L. Evans Loretta J. Mester are expected to deliver speeches this week, which is in support to more interest hikes this year. However, Mr. Dumalagan noted that this upbeat news will be tempered by likely stronger 2017 Chinese economic growth data.
Last Thursday, Chinese Premier Li Kequiang said he expected the country’s gross domestic product (GDP) to have grown 6.9% in 2017, faster than the 6.8% forecast from analysts as well as 6.5% target of the government. This faster growth will likely be driven by construction boom and increased demand for Chinese imports, Reuters reported.
Meanwhile, another trader said corporate demand “specifically from oil companies” will drive the movement of the peso.
“Usually, we see them buying mid-month and with the world prices of oil continuing to trade higher. I guess there’s room for them to buy dollars for them to pay their requirements,” the trader said over the phone on Friday.
For this week, Mr. Dumalagan expects the peso to move between P50 and P50.60 against the greenback, while Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, gave a lower range of P50.30 to P50.80. — K.A.N. Vidal
