Peso likely to trade sideways ahead of 1st quarter GDP report

THE PESO is expected to trade sideways against the dollar this week after headline inflation eased in April, and ahead of the release of key economic data at home and in the United States.

The local currency closed at PHP 55.30 versus the dollar on Friday, rising by five centavos from Thursday’s PHP 55.35 finish, data from the Bankers Association of the Philippines’ website showed.

Week on week, the peso strengthened by eight centavos from its P55.38 finish on April 28.

The peso opened Friday’s session at PHP HP 55.38 per dollar versus the dollar. Its worst showing was at PHP 55.42, while its intraday best was at PHP 55.16 versus the greenback.

Dollars traded went down to USD 1.29 billion on Friday from the USD 1.37 billion seen on Thursday.

The peso appreciated against the dollar on Friday amid bets of a pause in the Bangko Sentral ng Pilipinas’ (BSP) rate hike cycle after headline inflation slowed in April, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The better peso performance can be attributed to the better-than-expected CPI (consumer price index) print. Although, the gains of the peso were tempered by the possibility of a rate pause,” a trader likewise said in a Viber message.

Consumer prices rose by an annual 6.6% in April, slowing from 7.6% in March but faster than 4.9% in the same month last year, preliminary data from the Philippine Statistics Authority (PSA) released on Friday showed.

The April headline print was the slowest in eight months or since the 6.3% in August 2022 and was within the BSP’s 6.3-7.1% estimate for the month.

Still, this was the 13^th straight month that inflation breached the central bank’s 2-4% target for the year.

For the first four months, inflation averaged 7.9%, higher than 3.7% seen a year ago and above the BSP’s 6% forecast for 2023.

BSP Governor Felipe M. Medalla last month said the Monetary Board will likely look at pausing its tightening cycle at its May 18 review if inflation slowed further in April.

For this week, the trader said the peso could move sideways against the dollar following the slower inflation print and as investors anticipate the release of first-quarter Philippine gross domestic product (GDP) data and US economic reports.

The peso could be affected by April US CPI data to be released on May 10 and the April US producer price index report on May 11, as well as latest jobless claims data, Mr. Ricafort added.

The PSA will release first-quarter Philippine GDP data on May 11.

Economic growth likely eased in the first three months of the year as the boost from pent-up demand following the coronavirus pandemic continues to fade and amid elevated inflation that has resulted in higher interest rates, analysts said.

A BusinessWorld poll of 23 economists conducted last week yielded a median estimate of 6.1% for first-quarter GDP growth.

If realized, this would be slower than revised 7.1% growth in the fourth quarter of 2022, and the 8% expansion recorded in the same period last year.

The government targets 6-7% GDP growth for this year. The economy expanded by 7.6% in 2022.

For this week, the trader sees the peso moving between PHP 55 and PHP 56 per dollar, while Mr. Ricafort expects it to trade from PHP 55 to PHP 55.50. — AMCS