1 Month Resistance Holds Around 56.00, BSP Tightening Cycle To Extent Into 2023

The 1-month USD/PHP NDF has moved away from resistance at 56.00, last tracking just under 55.80. The 56.00 level has been a resistance point in recent weeks, while the past week has seen dips towards 55.50 supported. Below that is simple 200-day MA at 55.39. Earlier comments from the BSP Governor suggested the tightening cycle will extend into 2023.

• Governor Medalla noted it was extremely unlikely no action is taken at the next two policy meetings. These comments come after yesterday's 50bps hike. If we get 25bps at the first two policy meetings in 2023 (presuming another down step in the pace of tightening), this may leave the terminal rate at 6.00%.
• This is a touch more hawkish that some sell-side estimates, with some analysts stating we are already at the terminal rate post yesterday's move or only see one additional hike in early 2023.
• The Governor also noted that the central bank remains in local FX markets, both as a seller and buyer. This is likely designed to smooth out volatility rather than defend any particular level.
• Still, the bias may be to guard against excessive fresh depreciation pressures rather than curb PHP's rebound.