THE PESO may persist at the P55 mark this week as the dollar could continue to face pressure while markets await updates on the ongoing tariff discussions between the United States and its primary trading associates.
The local currency concluded at P55.57 per dollar on Friday, rising by 27 centavos from its P55.84 close on Wednesday, data from the Bankers Association of the Philippines revealed.
This represented the peso’s most favorable finish in over a year, or since it posted a P55.53-a-dollar close on March 15, 2024.
On a week-to-week basis, the peso appreciated by 69.5 centavos from its P56.265 closure on April 25.
The peso strengthened on Friday, buoyed by disappointing US gross domestic product (GDP) and manufacturing figures due to the evolving policies of the Trump administration, according to a trader in a phone conversation.
The US economy shrank for the first time in three years during the first quarter, overwhelmed by a surge of imports as companies rushed to mitigate the higher expenses associated with tariffs, highlighting the chaotic nature of President Donald J. Trump’s trade strategy, as reported by Reuters.
Economists predicted a rebound for the economy in the second quarter as the pressure from imports eases, but likely not sufficient to avoid a recession or a period of sluggish growth paired with elevated inflation, often termed stagflation. They emphasized that addressing the uncertainty stemming from the Trump administration’s constantly changing tariff stance was vital.
Gross domestic product declined at a 0.3% annualized rate in the last quarter, marking the first decrease since the initial quarter of 2022, as indicated by the Commerce department’s Bureau of Economic Analysis in its preliminary GDP estimate.
It was further impacted by a reduction in federal government expenditures, probably caused by the White House’s stringent funding cuts, characterized by mass layoffs and program closures.
The report reflected activity prior to Mr. Trump’s “Liberation Day” tariff declaration, which introduced extensive duties on most imports from the United States’ trade allies, including escalating tariffs on Chinese goods to 145%, igniting a trade dispute with Beijing.
Economists surveyed by Reuters had anticipated that GDP would rise at a 0.3% rate during the January-March timeframe.
Another report indicated that US manufacturing further contracted in April, while tariffs on foreign goods strained supply chains, resulting in increased costs for inputs and maintaining the narrative around stagflation.
The Institute for Supply Management’s manufacturing purchasing managers’ index (PMI) fell to a five-month low of 48.7, slightly surpassing expectations, compared to a reading of 49.0 in March. A PMI score below 50 signifies contraction. Economists surveyed by Reuters had forecast a decline to 48.
The peso was also bolstered by heightened remittances from overseas Filipinos ahead of the upcoming school year, added Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message.
For this week, US nonfarm payrolls data released on Friday could influence peso-dollar trading, advised the trader.
US job growth saw a slight slowdown in April, while employers continued to retain workers, but the outlook for the labor market appears increasingly grim as Mr. Trump’s protectionist trade policies elevate economic uncertainty, Reuters stated.
The Labor department’s closely monitored employment report released on Friday, which also indicated that the unemployment rate remained steady at 4.2% last month, helped alleviate concerns that the economy was nearing recession after GDP contracted in the first quarter amid a tariff-induced influx of imports. However, it remains early for the labor market to reflect the effects of Mr. Trump’s inconsistent tariff policy.
Nonfarm payrolls increased by 177,000 jobs last month following an upwardly adjusted 185,000 in March, as stated by the Labor department’s Bureau of Labor Statistics. Economists surveyed by Reuters had predicted 130,000 jobs added after a previously reported increase of 228,000 in March.
“The market will also be paying close attention to trade discussions between the US and China,” the trader further indicated.
The publication of April Philippine inflation data on Tuesday and the Federal Open Market Committee’s policy gathering this week could also impact the local currency, Mr. Ricafort mentioned.
He suggested the peso could fluctuate between P55.40 and P55.90 per dollar this week, while the trader anticipates it to range from P55.50 to P56.
A BusinessWorld survey of 14 analysts yielded a median forecast of 1.8% for the April consumer price index (CPI). This estimate is within the Bangko Sentral ng Pilipinas’ (BSP) projection of 1.3% to 2.1% for the month.
If actualized, April inflation would remain unchanged from the March figure and significantly slower than the 3.8% rate reported in the same month of 2024.
This would also represent the ninth consecutive month that the CPI remained within the BSP’s 2-4% target range. — A.M.C. Sy with Reuters
