Quarterly Economic Growth Release: Stronger case for a BSP cut in August
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Monthly Economic Update: Two more BSP cuts
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The Gist
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Today's Report
Your Morning Fix
- Wall Street’s main indexes were mixed on Thursday, after a hotter-than-expected producer prices report dampened expectations of potential interest-rate cuts.
- The US producer price index for final demand jumped 0.9% last month, the largest advance since June 2022, driven by a surge in the costs of goods and services, suggesting a broad pickup in inflation was imminent.
- The BSP ordered all electronic wallets (e-wallets), banks and other supervised institutions to remove in-app gambling assets, including any links that direct users to gaming or gambling websites.
- The value of foreign commitments approved by investment promotion agencies in the Philippines reached PHP 67.38 billion in the April-to-June period, down from the revised PHP 189.5 billion in the same period in 2024.
- New vehicle sales fell by 2.6% to 38,295 units in July from 39,331 units in the same month a year ago, as bad weather disrupted retail operations, CAMPI-TMA’s report showed.
Our Portfolio Recommendation
Our peso portfolio is tilted slightly toward fixed income. While local inflation remains low and monetary easing is likely to continue, yields may be pushed higher by upcoming bond auctions. Continued rate cuts and rising consumer strength are also favorable for local equities, especially real estate and retail. The dollar portfolio is the reverse, with slightly lower fixed income owing to the uncertainty of the effects of tariffs on inflation. US Federal Reserve rate cuts are also closely watched. We remain positive on global equities, with a preference for US sectors, particularly technology, communication services, and financials.
| 2025 Metrobank Forecast | 2026 Metrobank Forecast | 2027 Metrobank Forecast | |
|---|---|---|---|
| GDP | 5.5% | 6.1% | 6.0% |
| Inflation | 2.0% | 3.7% | 3.0% |
| BSP Target Reverse Repurchase Rate | 4.75% | 4.25% | 4.25% |
| Federal Funds Rate | 4.00% | 3.50% | 6.50% |
| USD/PHP | 56.1 | 55.7 | 55.3 |
CHART OF THE DAY
Chart of the Day
UK economy grows slightly above forecast in Q2
Britain’s economy slowed less than expected between April and June after a strong start to the year, despite the shock of US trade tariffs and a weaker jobs market. Official figures published on Thursday showed that after an unusually strong 0.7% quarter-on-quarter expansion in Q1 2025, gross domestic product grew 0.3% in Q2. This was above the 0.1% forecast by the Bank of England and a Reuters poll of economists. Economists said much of the growth reflected higher public spending and businesses at home and abroad building up stocks of goods ahead of higher US tariffs. Sources: Reuters, Bloomberg
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Persistent importer demand brings USD/PHP closer to 57.00
- The USD/PHP exchange rate opened 2 centavos lower at 56.70, still following the previous day’s weak dollar sentiment on suggestions of US Federal Reserve rate cuts.
- A run to the downside in offshore prices over lunch time led to a sudden drop in the spot rate to lows of 56.61.
- However, importer demand scaled into this dip, causing a short squeeze to highs of 56.955 as dealers were forced to buy dollars to cover short USD/PHP positions.
- The USD/PHP exchange rate closed at 56.945 or 22.5 centavos higher day-on-day.
- Looking ahead, we expect a more measured move lower as the spot rate continues to be supported on dips. Key supports are still at 56.70/56.60 while resistances are at 57.00 and 57.10/57.15 above.
READ MORE
Peso GS yields fall on improved risk sentiment
- The peso GS market saw better buying as risk sentiment improved on growing expectations that the US Federal Reserve may resume its easing cycle in September.
- Strong demand for local securities was supported by excess liquidity from the RTB 5-13 maturity while limited access to the RTB 5-19 offer period solely via online channels increased secondary market activity in other bonds.
- Most benchmark bonds closed 3 to 10 basis points (bps) lower, with FXTNs 7-70 (5-year) and 10-73 (10-year) dropped to 5.735% and 6.005%, respectively.
- With the RTB 5-19 offer period ending today and the Bureau of Treasury (BTr) estimated to have raised PHP 430 to 460 billion, we expect similar price action to continue next week, as both the local and global macroeconomic backdrop remain supportive of buying interest in local bonds.
- We prefer to wait for next week’s 10-year auction for better entry levels and our early indicative range stands at 5.95%-6.050%.
READ MORE
PSEi drops ahead of index rebalancing
- The Philippine Stock Exchange index (PSEi) traded in strength during the first half of the day before dropping 33.24 points (-0.53%) to 6,291.85 at the close, as investors positioned portfolios ahead of today’s index rebalancing.
- Services (-2.42%) and Property (-1.02%) led declines, while Financials (+0.09%) and Industrials (+0.38%) posted modest gains.
- Jollibee Foods Corp (+2.33%), Century Pacific Food, Inc (+1.18%), and Ayala Corp (+1.00%) led the day’s gainers.
- Converge ICT Solutions, Inc (-7.46%), Aboitiz Equity Ventures, Inc (-2.58%), and International Container Terminal Services, Inc (-1.84%) led the laggards.
- Turnover reached PHP 7.82 billion, with foreign investors posting net buying of PHP 101.47 million and accounting for 42% of trades as improving global risk sentiment increased appetite for emerging markets equities.
READ MORE
Persistent importer demand brings USD/PHP closer to 57.00
- The USD/PHP exchange rate opened 2 centavos lower at 56.70, still following the previous day’s weak dollar sentiment on suggestions of US Federal Reserve rate cuts.
- A run to the downside in offshore prices over lunch time led to a sudden drop in the spot rate to lows of 56.61.
- However, importer demand scaled into this dip, causing a short squeeze to highs of 56.955 as dealers were forced to buy dollars to cover short USD/PHP positions.
- The USD/PHP exchange rate closed at 56.945 or 22.5 centavos higher day-on-day.
- Looking ahead, we expect a more measured move lower as the spot rate continues to be supported on dips. Key supports are still at 56.70/56.60 while resistances are at 57.00 and 57.10/57.15 above.
READ MORE
Peso GS yields fall on improved risk sentiment
- The peso GS market saw better buying as risk sentiment improved on growing expectations that the US Federal Reserve may resume its easing cycle in September.
- Strong demand for local securities was supported by excess liquidity from the RTB 5-13 maturity while limited access to the RTB 5-19 offer period solely via online channels increased secondary market activity in other bonds.
- Most benchmark bonds closed 3 to 10 basis points (bps) lower, with FXTNs 7-70 (5-year) and 10-73 (10-year) dropped to 5.735% and 6.005%, respectively.
- With the RTB 5-19 offer period ending today and the Bureau of Treasury (BTr) estimated to have raised PHP 430 to 460 billion, we expect similar price action to continue next week, as both the local and global macroeconomic backdrop remain supportive of buying interest in local bonds.
- We prefer to wait for next week’s 10-year auction for better entry levels and our early indicative range stands at 5.95%-6.050%.
READ MORE
PSEi drops ahead of index rebalancing
- The Philippine Stock Exchange index (PSEi) traded in strength during the first half of the day before dropping 33.24 points (-0.53%) to 6,291.85 at the close, as investors positioned portfolios ahead of today’s index rebalancing.
- Services (-2.42%) and Property (-1.02%) led declines, while Financials (+0.09%) and Industrials (+0.38%) posted modest gains.
- Jollibee Foods Corp (+2.33%), Century Pacific Food, Inc (+1.18%), and Ayala Corp (+1.00%) led the day’s gainers.
- Converge ICT Solutions, Inc (-7.46%), Aboitiz Equity Ventures, Inc (-2.58%), and International Container Terminal Services, Inc (-1.84%) led the laggards.
- Turnover reached PHP 7.82 billion, with foreign investors posting net buying of PHP 101.47 million and accounting for 42% of trades as improving global risk sentiment increased appetite for emerging markets equities.
READ MORE