Manufacturing, trade, inflation and GDP releases dominate the Asian economic calendar in the coming week, though an Indonesian central bank policy meeting is likely to capture the most attention
The Indonesian central bank, Bank Indonesia (BI), announces the outcome of its monetary policy meeting on Tuesday (23 October). We believe it’s time for BI to pause the tightening started in May this year, and subsequently intensified amidst the emerging market currency contagion that saw the Indonesia rupiah (IDR) plunge in value. As part of its currency stabilisation drive, BI lifted the policy rate by a total 150 basis points to 5.75% through to September.
With well-behaved inflation, dipping below 3% year-on-year in September for the first time in over two years, monetary policy remains geared towards stabilising the Indonesian rupiah. And the USD/IDR appears to have traded tightly around 15,200 this month after an early October spike. Recent economic reports-, such as the trade balance swinging back to surplus in September and a lower-than-expected government budget deficit this year, are contributing to improve investor sentiment towards the currency. We believe this has taken pressure off the central bank to hike rates at the forthcoming policy meeting.
General market tone: Risk-off.
Equity markets continued to slide on protracted fears on global trade after acerbic comments from a US official on China’s trade practices, while Mario Draghi’s comments on EU nations' fiscal discipline also sent dealers to seek safety
Markets are likely to trade sideways with a downward bias after the Wall Street selloff overnight, while market players also looking to China's 3Q GDP report for more direction.