Peso seen sideways ahead of data

THE PESO will likely move sideways versus the dollar this week as market players anticipate the release of key economic data in the Philippines and in the United States, searching for hints about future rate decisions from the central banks of these countries.

The peso ended the week at P53.34 against the greenback, 17.5 centavos stronger than the P53.515 rate on Thursday that was a fresh 12-year low.

Week on week, Friday’s closing rate was the strongest performance since the P53.28-perdollar finish on June 22.

“The dollar might move sideways this week amid likely mixed US economic reports, expectations of more hawkish cues from the minutes of the latest US policy meeting, and early signs of moderating Philippine inflation,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines. “Geopolitical concerns involving China and the European Union are expected to introduce some volatility.”

Among the reports expected this week are data on US factory output, car sales, and jobs data. These could provide hints about economic activity which, in turn, will inspire upcoming interest rate decisions of the Federal Reserve.

Back home, the Philippine Statistics Authority will release June inflation data on Thursday. A BusinessWorld poll among economists yielded a 4.7% median forecast, which if realized will be a fresh peak in at least five years on the back of higher food and oil prices.

“Movements might be muted as some investors may opt to stay on the sidelines ahead of the Philippine inflation report, which is expected to provide some hints about the future policy moves of the BSP ( Bangko Sentral ng Pilipinas),” Mr. Dumalagan added.

Inflation has averaged 4.1% from January- May, beyond the BSP’s 2-4% target range for the year. This inspired a back-to-back hike from the central bank to rein in future inflation, although offi have kept the window open for succeeding rate increases when needed.

Another trader said the local unit will likely consolidate and keep trading within its range over the past week as investors take a wait-and-see stance.

“We are going to see the nonfarm payrolls data next Friday and we continue to monitor tensions on trade between China and the US — that has been taking center stage lately,” the trader said on Friday afternoon, pointing out that the peso may “stabilize for now.”

The trader expects the peso to trade between P53.15 and P53.50 against the dollar this week, while Mr. Dumalagan sees a wider range of P53-P53.50.