USD/PHP Back Close To 56.00 Handle, BSP Governor States Rates Likely On Hold This Week

USD/PHP sits just above 55.95 currently, down slightly from session highs near 55.98. The main focus has been on earlier comments from BSP Governor Medalla that the central bank may keep rates unchanged at the May 18 meeting (this Thursday). Finance Secretary who also sits on the BSP board stated he would vote for a pause at this week's meeting.

• Such an outcome is in line with the majority of sell-side analysts, although several have forecast a 25bps hike this week. Downside surprises on recent inflation outcomes seems to be enough to see the BSP pause, even with pressures coming off elevated levels.
• Such an outcome may impact PHP sentiment, particularly if the Fed outlook turns more hawkish. The BSP may well leave the door ajar for further tightening and may rule out cuts before the Fed goes down such a path (something Medalla has highlighted in recent commentary).
• For USD/PHP, the pair hasn't been to sustain gains above 56.00 recently. Note the 200-day MA is at 56.10.