BSP Open To Further Rate Hikes But Sees Reduced Odds Of 50bp August Move

The peso shows muted reaction to latest comments from Bangko Sentral ng Pilipinas Governor Medalla.

• The Governor used an interview with Bloomberg TV to explain where we stand after the surprise off-cycle 75bp rate hike announced on Thursday. Medalla cited "peso overshooting" as a factor the BSP was directly reacting to, after the currency flirted with record low levels. The Governor noted that the BSP still has "room to raise depending on the inflation picture," but "the need for a 50bp move in August is much less now." He also walked back on earlier claims that the BSP does not need to keep pace with the Fed, noting that the spillover from other countries was too large.
• The Philippines' implied policy curve shifter higher since the beginning of the week, hawkish Fedspeak & expectation-beating U.S. CPI applied pressure to Asia EM space, forcing the BSP into action. BBG MIPR tool shows the market is virtually fully pricing a scenario in which the key policy rate sits at 4% in three months' time from now. Barring off-cycle moves, this implies 75bp worth of rate hikes at the Bank's August and September meetings.
• Spot USD/PHP last sits +0.170 at PHP56.325. Gains past recent cyclical highs of PHP56.450 would bring the PHP56.500 ATH into view. Bears look for a retreat under Jun 29 low of PHP54.600.
• USD/PHP 1-month NDF last seen unch. at PHP56.530. Bulls set their sights on the record high of PHP56.760 printed Thursday. Bears keep an eye on Jun 28 low of PHP54.740.
• On the data front, the Philippines' overseas remittances data may hit the wires in the coming days.