USD/PHP Spikes Above 54.00, BSP To Hike By 25bps This Week

USD/PHP has spiked higher today, Onshore spot is above 54.00, around 0.55% above closing levels form last week. The 1 month NDF is at 54.210, also +0.50% for the session so far.

• We are now within striking distance of 2018 highs of around 54.45. The peso has lost 3% since the start of the month, se we wouldn't be surprised to see some smoothing related flows from the central bank.
• Incoming BSP Governor Medalla reiterated the central bank is likely to raise rates by 25bps in June (meeting this Thursday), with another similar hike in August. Further hikes may follow beyond August.
• Medalla stated the BSP's philosophy is gradualism and that they don't have to match the Fed's 75bps hike pace.
• At this rate, the policy differential with the Fed will be sub 0% before year end.
• The other focus point is rising domestic covid case numbers. Case numbers are up to 350 per day, a 50-60% weekly increase. This could rise to 800-1200 per day by the end of June according to the Department of Health. However, the department expects a strong surge to be avoided at this stage. Note we were above +35k in daily case numbers at the start of the year.