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Peso Unfazed By Inflation Overshoot


Spot USD/PHP has registered modest gains in early trade, catching up with overnight demand for the greenback, even as Philippine Jan CPI came in at +4.2% Y/Y, beating expectations of an unchanged pace of inflation of +3.5%.

  • Consumer prices soared at the fastest pace since Jan 2019. Core inflation was 3.4% Y/Y, while inflation in the capital region printed at +4.3%.
  • Headline CPI unexpectedly broke out of the BSP's forecast range of +3.3%-4.1% Y/Y and the central bank's inflation target of +2.0-4.0% Y/Y.
  • Chief Philippine statistician commented that the price increase was driven by food and drinks, particularly meat and vegetables. As a reminder, Pres Duterte signed an order to cap pork & chicken prices for 60 days and it will take effect from Monday.
  • Philippine Undersec Edillon said Thursday that the country's economic planning agency sees the unemployment rate at 7-9% in 2021 & 2022 vs. earlier target of 3-5% in 2022.
  • In local politics, the opposition Liberal Party leader said that his deputy Leni Robredo may represent the party in the 2022 presidential contest.
  • From the technical perspective, familiar lines in the sand remain. The rate sits at PHP48.083 at typing, slightly higher on the day & flirting with the 50-DMA. A break above Jan 28 high of PHP48.145 would inspire bullish hopes for a firmer topside move, while a dip through the PHP48.000 is needed to revive the bearish case.
  • BSP will deliver its latest monetary policy decision next Thursday.

Source: MNI - Market News/Bloomberg

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