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Peso Draws Support From Expectation-Busting CPI Print Ahead Of Aug 18 BSP Meet


The Philippine peso has been in demand after the release of domestic CPI data, which revealed a surprise acceleration in headline inflation. Price growth quickened to +6.4% Y/Y in July, the fastest pace since October 2018, with the median estimate in a Bloomberg survey suggesting it was expected to have stayed at 6.1%.

  • The largest contributor to the rise in the aggregate price index was the "food and non-alcoholic beverages" sub-index, followed by transport.
  • BSP Gov Medalla had earlier flagged that this month will see either a 25bp or 50bp rate hike. The expectation-beating inflation outcome may nudge the Monetary Board towards a bolder step.
  • Following the release of CPI data today, the central bank noted that it is prepared to take all necessary policy action to bring inflation toward a target-consistent path over the medium term.
  • Spot USD/PHP trades -0.255 at PHP55.360, with bears looking for a sell-off past Jul 29 low/50-DMA at PHP55.057/54.767. Conversely, a bounce above Jul 28 high of PHP55.975 would bring record highs at PHP56.500 into view.
  • USD/PHP 1-month NDF last seen -0.130 at PHP55.460. Bears look for a slide through Jul 29 low/50-DMA at PHP55.170/54.908, while bulls keep an eye on Jul 28 high of PHP56.060, followed by record highs at PHP56.740.
  • Notable data releases next week are all due Tuesday. On tap are unemployment, trade balance and GDP.

Fig. 1: Philippines CPI Y/Y (%) vs. Philippines CPI Food And Non-Alcoholic Beverages Y/Y (%)

Source: MNI - Market News/Bloomberg

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