US inflation The signal has passed its peak?
Date 16 May 2022 at 06:20 a.m.
The baht is likely to move in a frame of 34.20-35.00 this week. Key issues to monitor are Thai GDP and Japanese GDP for the first quarter.
Moneyweek column (Money…week) by…Panee Kittiphattakun, Manaswin Thitisomboon, Capital Market Business Division Kasikorn Bank
Capital Market Business Division Kasikorn Bank estimates that The baht is likely to move within the range of 34.20-35.00 this week. The key points to be monitored are Thai GDP and Japanese GDP for the first quarter. Thai GDP will be announced on Tuesday. In the last quarter, Thailand grew at 1.9%YoY and 1.8%QoQ and the market continues to expect Thailand to grow continuously. Japan will announce GDP on Wednesday. The market expects GDP to grow negatively from the previous quarter due to the COVID-19 outbreak. The epidemic was severe in the first quarter.
In addition, Britain will announce inflation numbers for April, with the latest March inflation growing at 7.0% YoY. The Bank of England expects inflation this year to reach 10% and the economy may enter a recession. Australia will release a report from its policy meeting on May 3, where the central bank raised interest rates for the first time since 2010.
Market overview of the exchange rate during May 9-13, 2022. The baht continued to depreciate. Amid capital outflows from both the bond market and the Thai stock market, the Bank of Thailand stated that the movement of the baht is in line with market mechanisms and currencies in Asia. The Finance Minister expects only 2 million tourists to Thailand this year and sees that the economy may recover slowly. The main driving force is still exports. In the first four months, more than 700,000 tourists arrived in Thailand. In addition, it is also preparing to reduce the diesel tax at 5 baht / liter, keeping diesel at 32 baht / liter until May 15, ready to approve the budget. help reduce electricity bills
US dollar strengthens Amid concerns over the economic climate following Powell admitted dealing with inflation might be detrimental. and indicated support for a 50bps rate hike in the next two meetings US inflation In April, it slowed to 8.3%YoY from 8.5%YoY in March, but remained above expectations of 8.1%YoY, signaling US inflation. It passed its peak in March. Ready to indicate that the labor market is still strong Although the initial unemployment benefits continued to increase higher than expected while the supply sector bottleneck continues reflected from the US Producer Price Index. In April, the increase was higher than expected.
Russia cuts gas exports to Germany by 3%, with gas transmission through Ukraine blocked. Causing gas prices in Europe to jump 11% and despite the ban on Russia But Russian oil revenues are still up around 50 percent as the eurozone economy faces heavy pressure. This made the ECB members increasingly support the interest rate hike in July. On the other hand, the European currency continued to weaken to its weakest level since January 2017 once morest the US dollar. and the weakest since 2016 once morest the yen Meanwhile, the Swiss franc weakened to test its frame once morest the US dollar for the first time since 2019. The Finnish president also vowed his support for joining NATO. while the United States State ready to support Finland and Sweden joining NATO
The British economy grew 0.8% QoQ in the first quarter of the year. This slowed from expectations of 1.0%QoQ and 1.3%QoQ in the previous quarter due to inflationary challenges and Brexit problems, while British gas futures prices jumped 41% on the back of Russia’s gas cuts. Dave Ramsden continues to show support for interest rate hikes to deal with inflation
China’s central bank governor Yi Gang has signaled further interest rates cut to support the economy. While the Chinese government tends to stick to its zero-tolerance policy for a long time. following warning the World Health Organization criticizing China’s policies It also announced that residents in 12 provinces of Beijing will reduce travel and limit travel outside the country. Meanwhile, China’s import exports were hit by the city lockdown, growing only 3.9%YoY in April. while imports shrink This caused the Yuan to continue to weaken to its weakest level since September 2020 once morest the US dollar.
The baht closed at 34.78 on Friday, May 13, 2022 at 5:00 PM.
Overall bond markets last week, yields on US 10-year Treasury bonds dropped from a weekly high of 3.20% to trading at 2.90%. to economic conditions that are at risk of entering a recession This is a result of interest rate hikes to control high inflation. Powell acknowledged that dealing with inflation might be detrimental. Ready to support a 50bps interest rate hike in the next two upcoming meetings This is consistent with many Fed members who have expressed their opinions in the same direction. And considering the Fed Fund Future numbers for its next meeting in June, Investors gave the Fed a 73% chance of a 75bps rate hike, partly due to the announcement of US inflation figures. In April, it stood at 8.3%, although it was a slower pace from 8.5%, but it must be admitted that inflation was still a very high figure. When the market in the short term is still pressured by the Fed’s interest rate hike As the long-term view, the market is worried regarding an economic recession, causing the Treasury yield curve to flatten, spreading between the two-year and 10-year US Treasury yields. (UST 2-10Y Spread) narrowed to +31 bps from +44 bps at the beginning of the week.
while Thai government bond yields rose. which was pressured by many countries’ interest rate hikes This led most analysts to return to their expectations that the Bank of Thailand might consider raising interest rates faster in the last quarter of this year. In the past week, foreign capital flows out of the bond market at a net worth of approximately 1,756 million baht, which is a net buy in short-term debt securities of 2,430 million baht, a net sale of long-term debt securities of 87 million baht and a net buy in debt securities of 2,430 million baht. Debt held by foreign investors expired at 4,099 million baht, resulting in as of May 13, 2022, the yield on the 1, 2, 3, 5, 7 and 10-year Thai government bonds was at 0.73% 1.75% 2.20. % 2.68% 3.09% and 3.39% respectively
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