USD/PHP Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and lacks a clear driver.
Key drivers:
• Rate gap: The US Federal Reserve's decision to pause rate cuts contrasts with expectations for a potential interest rate reduction by the Bangko Sentral ng Pilipinas, creating pressure on the peso.
• Risk/commodities: Recent volatility in global markets has boosted demand for the US dollar as a safe-haven asset, supporting its value against the peso.
• One macro factor: The IMF's forecast for slower economic growth in the Philippines may dampen investor confidence and further weaken the peso.
Range: The USD/PHP is likely to hold within its recent range, as it trades just below the 3-month average.
What could change it:
• Upside risk: A rebound in the US labor market reflected in upcoming job data could boost USD demand.
• Downside risk: Enhanced geopolitical tensions or indications of a weakening Philippine economy may further depreciate the peso.
