Peso to trade sideways ahead of FOMC minutes
THE PESO may trade sideways against the greenback this week amid a lack of major catalysts and with political noise in the US still weighing on investor sentiment amid mixed signals from the US Federal Reserve regarding their next tightening move.
The peso ended at P49.87 on Friday, dropping six- and- a- half centavos from its P49.805 finish the previous day.
Week on week, the peso also slid from its P49.76-a-dollar finish last May 12.
An economist from a local bank said the peso may trade sideways versus the dollar this week due to persisting political noise in the United States that may offset possibly hawkish remarks from Fed authorities during their Federal Open Market Committee ( FOMC) meeting earlier this month expected from the minutes of the gathering due for release this week.
“The dollar might move sideways this week with an upward bias, as political concerns in the US might partly offset the boost coming from the likely hawkish minutes of the recent US monetary policy meeting,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines.
Markets have become wary over US President Donald J. Trump’s ability to continue his economic and fiscal plans for the country after the tension between the US leader and Federal Bureau of Investigation ( FBI) Director James Comey, who had been leading a federal probe into possible collusion between Mr. Trump’s 2016 campaign team and Russia, increased.
“Potentially mixed opinions from various US Federal Reserve officials regarding the path of US interest rate normalization might also provide minimal directional guidance to the dollar,” he added.
Meanwhile, a trader said in a phone interview over the weekend that the peso will likely trade within a range of P49.60 to P49.90 versus the greenback due to a quiet market. “I think what we’re seeing is basically no major story, that’s why we’ll just stay within range,” the trader said.
The trader however noted that possible catalysts are negative sentiments resulting from disappointing first quarter economic data and updates on the government’s tax reform program.
Philippine economic growth in the first quarter stood at 6.4%, well below the government’s projected 7% growth and slower than the 6.6% in the previous quarter and from the 6.9% registered in the same period last year.
The Finance department’s comprehensive tax reform program or House Bill 5636 or the “Tax Reform for Acceleration and Inclusion” is scheduled to be opened for plenary debates and approval today.
“The factors that could reverse the dollar’s projected upward bias include weaker- than- expected hawkish guidance from the US policy meeting minutes and unexpected explosive revelations from former US FBI director James Comey,” Mr. Dumalagan noted.
Mr. Dumalagan expects the peso to trade between P49.70 and P50 against the dollar this week.
For his part, BDO Unibank Inc.’s Chief Market Strategist Jonathan L. Ravelas said in his weekly outlook: “Chart-wise, the week’s close at 49.76 continue to signal further consolidation within the P49.60–P50.00 range. Immediate support and resistance is seen at P49.60 and P50.40 levels, respectively.”