The PESO may look sideways against the dollar this week as the market reacts to key US labor data released on Friday that raised expectations for another rate cut by the US Federal Reserve this month.
The local unit closed at P57.735 per dollar on Friday, strengthening by 14.5 centavos from its close of P57.88 on Thursday, data from the Bankers Association of the Philippines showed.
This was the peso’s best close in more than six weeks or since it closed at P57.59 on October 21.
Week-to-week, the peso jumped 88.5 centavos from its close of P58.62 on November 29.
“The dollar weakened following the release of early US jobless claims and local inflation,” a trader said by phone on Friday.
Philippine inflation rose to 2.5% in November from 2.3% in October, the government reported last week.
However, this was slower than the 4.1% print in the same month last year and was within the bank’s forecast of 2.2%-3% for the month.
In the first 11 months, headline inflation averaged 3.2% over the 11-month period, faster than the BSP’s first full-year forecast of 3.1% but within its annual target of 2-4%.
Meanwhile, the number of Americans filing new claims for unemployment benefits rose slightly in the last week of November, pointing to a slight easing of labor market conditions heading into the latter half of 2024, Reuters reported.
Initial claims for federal jobless benefits rose by 9,000 to a seasonally adjusted 224,000 in the week ending Nov. 30, the Labor Department said Thursday. Economists polled by Reuters had forecast 215,000 claims last week.
The details included the Thanksgiving holiday, which may have added some noise to the report. Claims are entering a period of volatility, which can make it difficult to get a clear picture of the labor market.
The peso also continued to be supported by the seasonal increase in remittances from Filipino workers abroad during the holidays, said the Chief Economist of Rizal Commercial Banking Corp. Michael L. Ricafort in a Viber message.
This week, the trader said the foreign exchange market will react to the US nonfarm payrolls (NFP) data released on Friday.
“The soft NFP figures may encourage dollar selling, while a surprisingly strong NFP may push the dollar-peso to P58,” a trader said.
The trader sees the peso moving between P57.50 and P58 per dollar this week, while Mr. Ricafort expects it to go from P57.25 to P57.85.
US job growth picked up in November after being severely hampered by hurricanes and strikes, but a rise in the unemployment rate to 4.2% points to a weakening labor market that should allow the Federal Reserve to cut interest rates again this month, Reuters reported.
A healthy labor market is driving the economy through strong consumer spending, as the closely watched Labor Department report on Friday showed strong wage growth last month. The economy created 56,000 more jobs in September and October than previously thought.
Nonfarm payrolls rose by 227,000 jobs last month after a revised 36,000 increase in October, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast that wage earners would gain 200,000 jobs following a previously reported increase of 12,000 in October.
Job growth has reached 173,000 per month over the past three months.
Financial markets see an almost 89% chance of a quarterly rate cut at the US central bank’s December 17-18 policy meeting, up from 72% previously, CME Group’s FedWatch tool showed. The Fed has cut interest rates by 75 basis points since September, when it launched its easing cycle. Its policy rate is now 4.50%-4.75%, having been increased by 5.25% between March 2022 and July 2023. – AMC Sy with Reuters
Source link
