Unwinds Post Its BSP Pause Losses, BSP Governor States Ready To Hike If Conditions Warrant

USD/PHP is tracking well below Thursday closing levels. The pair was last in the 56.45/50 region, after closing at 56.775 on Thursday (a PHP gain of ~0.50% so far today). Earlier August highs came in close to 56.45, which may act as a support point, while the 20-day EMA sits further south, just under 56.00. Softer USD trends elsewhere are helping, while BSP Governor Remolona also gave a hawkish interview earlier.

• The Governor stated that the central bank is ready to hike again if upside risks materialize and that Thursday's pause was a hawkish one (we did see some PHP weakness post yesterday's policy outcome). Risks to the CPI outlook are tilted to the upside, but that headline inflation should be back within the target band (2-4%) by the end of 2023.
• The central bank also wants to lower the RRR further, but it doesn't make sense to do so whilst it's in a tightening cycle.
• On the FX side, Remolona noted that while the central bank intervenes from time to time, it's forward policy guidance that is more important in terms of USD/PHP trends. He also added a firmer USD backdrop and market risk aversion had weighed on PHP recently.
• On the data front today we have the July overall BoP balance, there is no consensus but the June read was -$606mn.