USD/PHP analysis: Philippine peso outlook after the GDP data
- Philippine published better-than-expected Q1 GDP data.
- The economy expanded by 6.4% on a year-on-year basis.
- The country’s inflation has also eased in the past three straight months.
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The USD/PHP exchange rate moved sideways on Thursday morning as the market reflected on the latest Philippine GDP and US consumer inflation data. The USD to PHP exchange rate was trading at 55.70, where it has been since Tuesday. This price is a few points above last week’s low of 55.14.
Philippine GDP data
The Philippine economy is doing well even as the country’s widening trade deficit continues. According to the statistics agency, the country’s economy expanded by 1.1% on a QoQ basis in the first quarter. This increase was better than the median estimate of 0.9%.
The economy expanded by 6.4% from a year earlier. Again, this was better than the expected 6.1% but lower than the previous growth of 7.1%. This growth was helped by increased manufacturing and household consumption during the quarter.
Other parts of the Asian economy are doing well. For example, data published last week showed that the country’s consumer inflation eased slightly in May. According to the statistics agency, inflation rose by 6.6% in April, the third straight decline after peaking at 8.3% in January.
As a result, the Philippines central bank has decided to slow the pace of rate hikes and I believe that it will end the increases soon. In April, the bank hiked the overnight lending rate by 0.25% to 6.25%. This means that the bank has hiked rates by about 425 basis points during the tightening cycle.
The USD/PHP exchange rate also reacted to the latest US consumer inflation data. According to the BLS, the headline consumer inflation dropped from 5% in March to 4.9% in April. Core inflation fell to 5.4% during the month. These numbers point to a Fed pivot or pause.
USD/PHP technical analysis
The USD/PHP exchange rate has recovered modestly after dropping to 54 in April. It has risen by more than 2.9% to trade at 55.70. On the 4H chart, the pair has jumped above the 50-period moving average and the 38.2% Fibonacci Retracement level.
The USD to PHP pair has moved to the top of trading range of the Murrey Math Lines. Therefore, the pair will likely resume the bullish trend as buyers target the ultimate resistance point at 56.05. The stop-loss of this trade will be at 55.12 (strong, pivot, reverse).
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