USD/PHP: Peso retreat s as Philippine’s inflation dips again

The USD/PHP exchange rate drifted upwards after the latest Philippine consumer price index (CPI) data. The pair has risen in the past three straight days and is hovering at the highest level since June 23rd. It has soared by more than 2.5% from its lowest level last week.

Philippine inflation, US NFP data

Philippines’ consumer inflation continued falling in July. Data published by the country’s statistics agency showed that the headline consumer price index (CPI) dropped from 0.2% in June to 0.1% in July. 

This decline translated to a 4.7% annual increase, which was lower than the median estimate of 4.9%. Inflation stood at 5.4% in June. These numbers show that inflation has been falling in the past few months after peaking at 8.7% in February of this year.

These numbers signal that the country’s central bank will maintain interest rates steady in the next few months since the economy is showing some signs of weakness. The bank has maintained interest rates unchanged in the past two meetings. Its next meeting will happen on August 17th.

In a statement on Friday, the head of the Philippines’ central bank warned that he was ready to tighten if inflation remains high. He said:

“The BSP stands ready to adjust the monetary policy stance as necessary to prevent the further broadening of price pressures as well as the emergence of additional second order effects.”

USD/PHP waits for US NFP data

The next important catalyst for the USD/HP will be the upcoming US non-farm payrolls (NFP) data scheduled for Friday. These are important numbers since the Fed has maintained that it will remain data-dependent when making the next decisions.

Economists polled by Reuters expect the data to reveal that the labour market softed in July. Precisely, the median estimate is that the economy added 175k jobs in August after adding 149k in the previous month.

A report by ADP showed that America’s private sector added over 340k jobs during the month. In the past, the data by ADP tends to differ from the official report by the Bureau of Labour Statistics (BLS).

Economists expect that the unemployment rate remained intact at 3.6% while the average weekly hours stood at 34.4. Average hourly earnings are expected to come in at 4.2%, down from the previous 4.4%. These numbers will come at a time when investors are concerned about the US economy after the Fitch credit rating, which I wrote on here.