EUR/USD depreciated for a fourth session to 1.1174 but remained within its three-week range of 1.1110-1.1270. The Fed and the European Central Bank are expected to keep interest rates unchanged this week while signalling further tightening in December. Both currencies also face political headwinds – social unrest in France and the possibility of a Democratic sweep in the US midterms. Moody’s decision to reaffirm France’s Aa3 sovereign credit rating has given the ECB some breathing room to focus on inflation amid a resurgence in global oil prices. However, its negative outlook underscores the need for the Lecornu government to pass a credible deficit-reducing 2027 Budget to ease elevated borrowing costs and ease social unrest. Encouragingly, the 10Y OAT-Bund spread eased to 153.5 bps from last Thursday’s high of 174 bps.
The PHP depreciated to a record low near 64 per USD, shrugging off Bangko Sentral ng Pilipinas’ surprise 50-bps hike to 5.50% on October 22. The larger-than-expected rate increase failed to restore confidence, as resurgent global oil prices added to the country’s stagflation risks. GDP growth slowed to a five-year low of 2.3% YoY in 2Q26, while CPI inflation accelerated to 7.2% YoY in September, its highest since 2023. As a major net oil importer, the Philippines faces a worsening trade-off between containing imported inflation and supporting an already softer economy. The PSEi stock market remains weak within a 5600-5800 range after plunging 14.2% between July 21 and October 15, driven by deteriorating earnings prospects, higher borrowing costs, and discouraging portfolio inflows. With gross international reserves falling 5.1% to a three-year low of USD 99.5 billion in September, policymakers have less room to lean against sustained depreciation without further depleting external buffers. USD/PHP could extend its rise to 65 if it breaks sustainably above the multi-year trendline resistance at 64.
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The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
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