Headwinds Remain

Spot USD/PHP now up on the day as risk-off impetus kicks in, with participants wary of purchasing riskier assets on the back of lingering China COVID worry & regulatory action taken by Chinese antitrust authorities over the weekend. This allows recent peso weakness to deepen, after the currency finished last week underperforming its regional peers by comfortable margins.

• The spot rate last deals +0.030 at PHP55.965, with bulls looking to claim Friday's high of PHP56.130 before targeting Jul 8, 2005 high of PHP56.448. Bears need a dip through Jun 29 low of PHP54.600 to get some incremental reprieve.
• USD/PHP 1-month NDF last +0.140 at PHP56.120. Topside focus falls on the prior trading day's high of PHP56.250, while bears keep an eye on Jun 28 low of PHP54.740.
• Recent peso weakness has stemmed from the BSP's declared "hands-off" approach to managing the FX rate, even as the central bank has recently talked up the likelihood of a 50bp rate hike next month, seemingly walking back on its earlier embrace of "a philosophy of gradualism."
• The Philippines' Development Budget Coordination Committee (DBCC), whose economic projections are used for fiscal purposes, revised GDP growth forecast for the coming years last Friday. The economy is expected to expand by +6.5%-8.0% Y/Y each year from 2023 to 2028, a more ambitious target than the +6.0%-7.0% forecast from the previous administration. Still, growth outlook for this year was trimmed to +6.5%-7.5% from +7.0%-8.0%.
• Also worth flagging that the DBCC expects USD/PHP to be within the PHP51-55 from 2023 through the end of President Marcos' term in 2028. The FX forecast for this year was kept unchanged at PHP51-53.
• Domestic data highlights this week include monthly trade report, due for release tomorrow.