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Peso Gains Strength Despite Thursday's Rate Cut From BSP

PHP

Spot USD/PHP dipped after the re-open of onshore trade, erasing the prior day's gain despite Thursday's surprise rate cut from BSP. The MPC slashed the overnight reverse repo rate by 25bp to 2.00%, as expected by 5/13 analysts surveyed by BBG, with the rest predicting a stand-pat decision. The rate trades -6 pips at PHP48.26 when this is being typed.

  • BSP Gov Diokno held a press briefing today. The official stuck to familiar lines from yesterday's statement, which noted that a benign inflation outlook and stable inflation expectations provided the central bank enough policy space to remain accommodative.
  • In addition, Diokno reminded that bank lending remains tepid amid risk aversion and weak demand.
  • On that note, local bank lending data is due next Friday.
  • A break under Nov 9 low of PHP48.11 is needed to confirm the resumption of a broader downtrend, opening up the round figure of PHP48.00. Bulls look for a break above the 61.8% retracement of the Oct 16 - Nov 9 slide, which coincides with Nov 13 high at PHP48.48. A clean breach of the level would expose the high print of Oct 16 at PHP48.71.
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