USD/JPY On The Brink: A Surge Awaits If Resistance Falls

Titan FX

Forex

Summary:

The USD/JPY market analysis.

Key Highlights

•USD/JPY started a fresh increase above the 146.00 resistance.

•A major bearish trend line is forming with resistance at 150.00 on the 4-hour chart.

•Gold prices could again aim for a move above the $2,480 resistance.

•EUR/USD surged toward the 1.1040 level before the bears emerged.

USD/JPY Technical Analysis

The US Dollar started a fresh upward move above the 144.50 and 145.00 levels against the Japanese Yen. USD/JPY cleared the 146.50 level to enter a positive zone. USD/JPY On The Brink: A Surge Awaits If Resistance Falls_1

USD/JPY On The Brink: A Surge Awaits If Resistance Falls_1

Looking at the 4-hour chart, the pair climbed above the 50% Fib retracement of the downward move from the 155.21 swing high to the 141.68 low. The pair showed positive signs and cleared the 148.00 resistance.

However, the pair is now facing many hurdles on the upside. The first key resistance sits near the 149.20 zone and the 100 simple moving average (red, 4-hour).

There is also a major bearish trend line forming with resistance at 150.00 on the same chart. The trend line is near the 61.8% Fib retracement of the downward move from the 155.21 swing high to the 141.68 low.

A clear move above the trend line might send the pair higher toward the 152.00 resistance or the 200 simple moving average (green, 4-hour).

Any more gains could send the pair toward the 155.00 level. Immediate support is near the 147.50 level. The next major support is near the 146.80 level. A downside break and close below the 146.80 support zone could open the doors for more losses. In the stated case, USD/JPY might decline toward the 145.50 level.

Looking at Gold, the price started a fresh increase and there are chances that the bulls might aim for a move above the $2,480 level.

Risk Warnings and Disclaimers

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IC Markets

Commodity

Forex

Economic

What happened in the U.S. session?

Building permits – a leading indicator for the residential construction sector – missed its estimate of 1.43M as only 1.39M permits were registered for the month of July, falling 4% MoM to mark the largest decline since March. In addition, housing starts also fell short of market estimates as 1.24M new homes began construction, dropping 6.8% MoM – this was the biggest fall since March. In short, this latest result casts some doubts over the strength of the residential construction sector.

Meanwhile, the preliminary findings from the University of Michigan’s (UoM) Consumer Sentiment survey showed sentiment improving slightly in August with a reading of 67.8, edging higher from 66.4 in July. Consumer confidence has moderated lower after its high of 79.4 in March as Americans remain guarded about their outlook. Overall, expectations strengthened for both personal finances and the five-year economic outlook, which reached its highest reading in four months.

The dollar index (DXY) fell over 0.6% last week as it shed 64 pips to close at 102.39. This index has now dropped over the past four consecutive weeks as demand for the greenback has dissipated significantly.

What does it mean for the Asia Session?

The DXY opened at 102.40 this morning and edged lower – overhead pressures remain and we can expect the other major currencies to outperform the dollar once more. Moving over to commodities, spot prices for gold remain elevated as it was trading around $2,500/oz while crude prices continued to slide lower this morning with WTI oil dipping under $76.50 per barrel.

The Dollar Index (DXY)

Key news events today

CB Leading Economic Index (2:00 pm GMT)

What can we expect from DXY today?

The Conference Board will release its Leading Economic Index (LEI) for the month of July later today. After falling slightly from 101.3 to 101.1 in June, this index is expected to edge lower again down to 100.7 as concerns surrounding gloomy consumer expectations, weak new orders, negative interest rate spread, and an increased number of initial claims for unemployment continue to gain traction. Should the LEI drop more than anticipated, it could add further downward pressure on the dollar.

Central Bank Notes:

•The Federal Funds Rate target range remained unchanged at 5.25% to 5.50% for the eighth meeting in a row.

•The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals continue to move into better balance.

•The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.

•Recent indicators suggest that economic activity has continued to expand at a solid pace while job gains have moderated, and the unemployment rate has moved up but remains low.

•In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks and does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.

•In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.

•In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee slowed the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.

•The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.

•Next meeting runs from 17 to 18 September 2024.

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

CB Leading Economic Index (2:00 pm GMT)

What can we expect from Gold today?

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie gained almost 1.4% as it closed at 0.6670 last Friday to notch its second consecutive week of gains. This currency pair was rising strongly towards the threshold of 0.6700 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6565

Resistance: 0.6790

Central Bank Notes:

•The RBA kept the cash rate target unchanged at 4.35%, marking the sixth consecutive pause.

•Inflation has fallen substantially since its peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance but it still remains above the midpoint of the 2 to 3% target range.

•The CPI rose by 3.9% over the year to the June quarter, demonstrating that inflation is proving persistent. In year-ended terms, underlying inflation has now been above the midpoint of the target for 11 consecutive quarters while quarterly underlying CPI inflation has fallen very little over the past year.

•The central forecasts set out in the latest SMP are for inflation to return to the target range of 2 to 3% in late 2025 and approach the midpoint in 2026. This represents a slightly slower return to target than forecast in May, based on estimates that the gap between aggregate demand and supply in the economy is larger than previously thought.

•Momentum in economic activity has been weak, as evidenced by slow growth in GDP, a rise in the unemployment rate and reports that many businesses are under pressure. In addition, there is a risk that household consumption picks up more slowly than expected, resulting in continued subdued output growth and a noticeable deterioration in the labour market.

•Inflation in underlying terms remains too high, and the latest projections show that it will be some time yet before inflation is sustainably in the target range while recent data have reinforced the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out.Policy will need to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range and will rely upon the incoming data and the evolving assessment of risks to guide its decisions.

•Next meeting is on 5 November 2024.

Next 24 Hours Bias

Medium Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Despite a surprise rate cut by the RBNZ last Wednesday, the Kiwi rose almost 1% last week as it closed at 0.6054 to register a third consecutive week of gains. This currency pair was trading around 0.6060 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 0.5975

Resistance: 0.6100

Central Bank Notes:

•The Monetary Policy Committee agreed to reduce the OCR by 25 basis points, bringing it down to 5.25% in August as inflation converges on target.

•The Committee is confident that inflation is returning to within its 1-3% target band as surveyed inflation expectations, firms’ pricing behaviour, headline inflation, and a variety of core inflation measures are moving consistent with low and stable inflation.

•Economic growth remains below trend and inflation is declining across advanced economies – imported inflation into New Zealand has declined to be more consistent with pre-pandemic levels.

•Services inflation remains elevated but is also expected to continue to decline, both at home and abroad, in line with increased spare economic capacity.

•Consumer price inflation in New Zealand is expected to remain near the target mid-point over the foreseeable future.

•A broad range of high-frequency indicators point to a material weakening in domestic economic activity in recent months – these include various survey measures of business activity, electronic card transactions, vehicle traffic, house sales, filled jobs, and job vacancies; these indicators collectively provide a consistent signal that the economy contracted in recent months.

•The pace of further easing will depend on the Committee’s confidence that pricing behaviour remains consistent with a low inflation environment, and that inflation expectations are anchored around the 2% target.

•Next meeting is on 9 October 2024.

Next 24 Hours Bias

Medium Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The Japanese strengthened significantly for most parts of July as USD/JPY lost 9%.1 shedding over 1,400 pips over this period. However, demand for the yen waned over the last couple of weeks causing USD/JPY to stabilize around 144 before retracing higher to close at 147.56 last Friday. This currency pair was trading around 147.75 as Asian markets came online – these are the support and resistance levels for today.

Support: 142.10

Resistance: 150.90

Central Bank Notes:

•The Policy Board of the Bank of Japan decided, by a 7-2 majority vote, to set the following guideline for money market operations for the intermeeting period and decided on the following measures:

The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25% while reducing its purchase amount of Japanese government bonds (JGB) by a unanimous vote.

The Bank decided, by a unanimous vote, on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.

•The year-on-year rate of increase in the CPI (all items less fresh food) is likely to be at around 2.5% for fiscal 2024 and then be at around 2% for fiscal 2025 and 2026.

•Meanwhile, underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.

•In the second half of the projection period, it is likely to be at a level that is generally consistent with the price stability target of 2%.

•Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.

•Next meeting is on 20 September 2024.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

The Euro saw a strong bid last Friday as it rose strongly from 1.0966 to close at 1.1028. This currency pair was trading around 1.1030 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.0900

Resistance: 1.1105

Central Bank Notes:

•The Governing Council today decided to keep the three key ECB interest rates unchanged in July, following a 25 basis points cut in June.

•Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.25%, 4.50% and 3.75% respectively.

•Monetary policy is keeping financing conditions restrictive but at the same time, domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year.

•While some measures of underlying inflation ticked up in May owing to one-off factors, most measures were either stable or edged down in June.

•The incoming information indicates that the euro area economy grew in the second quarter, but likely at a slower pace than in the first quarter.

•Services continue to lead the recovery, while industrial production and goods exports have been weak – investment indicators point to muted growth in 2024, amid heightened uncertainty.

•The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.

•The Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner and will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim and is not pre-committing to a particular rate path.

•Next meeting is on 12 September 2024.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Demand for the franc has waned over the last couple of weeks as USD/CHF reversed off 0.8437 in early August to gain nearly 1% over this period, closing at 0.8659 last Friday. This currency pair gapped lower this morning to open at 0.8642 before climbing above 0.8650 – these are the support and resistance levels for today.

Support: 0.8585

Resistance: 0.8750

Central Bank Notes:

•The SNB eased monetary policy by lowering its key policy rate by 25 basis points for the second consecutive meeting, going from 1.50% to 1.25% in June.

•The underlying inflationary pressure has decreased again compared to the previous quarter but inflation had risen slightly since the last monetary policy assessment, and stood at 1.4% in May.

•The inflation forecast puts average annual inflation at 1.3% for 2024, 1.1% for 2025 and 1.0% for 2026, based on the assumption that the SNB policy rate is 1.25% over the entire forecast horizon.

•Swiss GDP growth was moderate in the first quarter of 2024 with the services sector continuing to expand, while manufacturing stagnated.

•Growth is likely to remain moderate in Switzerland in the coming quarters as the SNB anticipates GDP growth of around 1% this year while currently expecting growth of around 1.5% for 2025.

•Next meeting is on 26 September 2024.

Next 24 Hours Bias

Weak Bullish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

After falling for four consecutive weeks, the Pound finally found a strong bid last week as Cable stabilized around 1.2750 before rising strongly to close at 1.2945 last Friday. This currency pair opened at 1.2931 this morning and was edging higher towards 1.2950 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 1.2810

Resistance: 1.3050

Central Bank Notes:

•The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5-to-4 to reduce its Official Bank Rate by 25 basis points to 5.00% on 1st August 2024.

•Five members preferred to reduce the Bank Rate by 25 basis points to 5%, an increase of two from the previous meeting while four members preferred to maintain the Bank Rate at 5.25%.

•Twelve-month CPI inflation was at the MPC’s 2% target in both May and June but it is expected to increase to around 2.75% in the second half of this year as declines in energy prices last year fall out of the annual comparison, revealing more clearly the prevailing persistence of domestic inflationary pressures. Private sector regular average weekly earnings growth has fallen to 5.6% in the three months to May, and services consumer price inflation has declined to 5.7% in June.GDP has picked up quite sharply so far this year, but underlying momentum appears weaker.

•GDP had grown by 0.7% in 2024 Q1, with that strength appearing to have continued into Q2. Growth in the first half of the year had been stronger than expected at the time of the May Report.

•Business surveys had continued to point to underlying growth of around 0.3% per quarter, somewhat weaker than headline GDP growth. A margin of slack should emerge in the economy as GDP falls below potential and the labour market eases further.

•The Committee noted that it is now appropriate to reduce slightly the degree of policy restrictiveness but monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.

•The Committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.

•Next meeting is on 19 September 2024.

Next 24 Hours Bias

Medium Bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

Demand for the Loonie increased significantly over the last couple of weeks as USD/CAD fell 1.4% over this period. This currency pair opened at 1.3678 this morning to resume its downward slide – these are the support and resistance levels for today.

Support: 1.3600

Resistance: 1.3760

Central Bank Notes:

•The Bank of Canada reduced its target for the overnight rate by 25 basis points to 4.50% while continuing its policy of balance sheet normalization.

•Canada’s economic growth likely picked up to about 1.5% through the first half of this year and is forecasted to increase in the second half of 2024 and through 2025.

•Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.4% in 2026, reflecting stronger exports and a recovery in household spending and business investment as borrowing costs ease.

•CPI inflation moderated to 2.7% in June after increasing in May as broad inflationary pressures eased.The Bank’s preferred measures of core inflation have been below 3% for several months and the breadth of price increases across components of the CPI is now near its historical norm but shelter price inflation remains high, driven by rent and mortgage interest costs, and is still the biggest contributor to total inflation.

•These preferred measures of core inflation are expected to slow to about 2.5% in the second half of 2024 and ease gradually through 2025 and CPI inflation is expected to come down below core inflation in the second half of this year, largely because of base year effects on gasoline prices.

•There are signs of slack in the labour market with the unemployment rate rising to 6.4%, as employment continues to grow more slowly than the labour force and job seekers taking longer to find work. Wage growth is showing some signs of moderation, but remains elevated.

•The Governing Council’s future monetary policy decisions will be guided by incoming information and assessment of their implications for the inflation outlook.

•Recent data has increased the council’s confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain.

•Next meeting is on 4 September 2024.

Next 24 Hours Bias

Medium Bearish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Crude oil prices reversed sharply last Tuesday with WTI oil briefly touching $80.55 per barrel before tumbling hard to close at $76.50 on Friday. This benchmark opened at $76.46 per barrel this morning and was sliding lower towards the $76-mark – these are the support and resistance levels for today.

Support: 75.00

Resistance: 80.30

Next 24 Hours Bias

Weak Bearish

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Census Bureau

Data Interpretation

On August 16 local time, the US Census Bureau released the monthly new residential construction data for July:

Privately-owned housing starts in July were at a seasonally adjusted annual rate of 1,238,000, compared to the expected 1,330,000 and the previous month's revised 1,329,000.

Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,396,000, while the expected number was 1,429,000 and the previous month's reading was 1,446,000.

New housing starts totaled 1,238,000 in July, down 6.8 percent from June to the lowest level since May 2020, driven by fewer single-family units and weaker demand. Of those, single-family housing starts fell to 851,000, down 14.1 percent from the revised June figure, marking the largest decline since April 2020. Multifamily housing starts, on the other hand, rose to 387,000. The decline was particularly notable in the South region, which may be related to the impact of Hurricane Beryl. Meanwhile, building permits, a predictor of future housing starts, also fell by 4 percent to 1,396,000 units.

The latest survey shows that in August, the US homebuilder confidence declined for the fourth consecutive month. Builders are facing rising interest rates, labor shortages, higher construction material prices, and other issues. At the same time, high mortgage rates and home prices discourage buyers, causing housing inventories to reach the highest level since 2008, and prompting homebuilders to scale back construction. Housing demand appears particularly fragile.

However, Robert Dietz, NAHB's chief economist, said that good inflation data suggests the Fed could take a rate cut as early as September and that rates are expected to moderate in the coming months. This will help homebuyers and builders who are facing tight loan conditions now, hopefully boosting demand for homes.

US Housing Starts in July

Risk Warnings and Disclaimers

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Owen Li

Energy

China's production of coal is rising while its share of electricity generation is declining, a seeming contradiction that will likely result in lower imports volumes and cheaper prices.

Coal output rose 2.8% in July from the same month a year earlier, hitting 390.37 million metric tons, according to data released on Aug. 15 by the National Bureau of Statistics.

July's output was down from June's 405.38 million tons, which was the strongest month so far this year. July was also the third-highest monthly production so far in 2024 and output has been trending higher since April.

The rising availability of coal in the world's biggest producer, importer and consumer of the fuel hasn't translated into an increased share of the total electricity generation, the primary use for the fuel.

Instead, China's coal-fired power is losing market share to cleaner alternatives, a trend likely to continue, given the ongoing rapid installation of solar, and to a lesser extent, wind capacity.

China's thermal power generation dropped in July for a third month on a year-earlier basis, despite rising overall power consumption.

Thermal power output, which is largely coal-fired with only a small amount of natural gas generation, fell 4.9% in July from the same month in 2023 to 574.9 billion kilowatt-hours (kWh).

Total generation rose 2.5% to 883.1 billion kWh, with hydropower output jumping 36.2% to 166.4 billion kWh.

China is experiencing a hotter than usual summer, which has boosted electricity demand for cooling.

Hydropower is increasing off a low base in 2023, when output was affected by low rainfall.

Other clean energy generation is also grabbing a higher share, with solar up 16.4% in July and nuclear increasing 4.3%.

China has ramped up installations of renewable energy, with 102 gigawatts (GW) of capacity being added in the first half of 2024, taking total capacity to more than 700 GW.

About 26 GW of wind capacity was added in the first six months of 2024, with the combined wind and solar additions being almost seven times the 18.3 GW of new coal-fired generation.

Market Dynamics

The recovery in hydropower and the rapid rollout of solar, coupled with rising coal production, are likely to alter the dynamics of the thermal coal market in China.

Domestic prices have started to decline, with the benchmark price of thermal coal at Quinhuangdao, as assessed by consultants SteelHome, slipping to end at 835 yuan ($116.55) a ton on Aug. 16.

It has trended lower since its most recent peak of 885 yuan a ton on May 28, and has dropped 11.2% since the peak so far in 2024 of 940 yuan on Feb. 27.

The lower domestic price has meant that thermal coal imported from Indonesia and Australia, the world's two biggest exporters of the fuel and the top suppliers to China, has also had to adjust through lower prices.

Indonesian coal with an energy content of 4,200 kilocalories per kilogram (kcal/kg), as assessed by commodity price reporting agency Argus, ended at $51.18 a ton in the week to Aug. 16.

This was the lowest in 11 months and the price has dropped 12% since its high so far this year of $58.17 a ton in the week to March 8.

Australian coal with an energy content of 5,500 kcal/kg finished at $86.78 a ton in the seven days to Aug. 16, down 10.2% from its peak so far in 2024 of $96.66 in the week to March 1.

The softer seaborne coal prices have helped keep import volumes strong so far in 2024, with official data showing imports of all grades of coal rising 13.3% in the first seven months of the year to 295.78 million tons.

But data from commodity analysts Kpler suggests that seaborne imports of thermal coal are starting to ease back.

Kpler assessed July seaborne thermal coal arrivals at 28.56 million tons, down from 29.38 million in June and 30.67 million in May.

For August, it's possible that thermal coal imports will drop for a third month, with Kpler estimating arrivals of 28.26 million tons.

With domestic coal output recovering and prices easing, its likely that seaborne cargoes will have to decline in price to remain competitive.

Source: Reuters

Risk Warnings and Disclaimers

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Samantha Luan

Economic

Although gaining strong growth in export turnover in the first seven months of this year, Vietnam still faces many challenges to maintain the high growth in the export until this year end.

With the gradual recovery of the world market and increase of export orders, trade activities in the first seven months achieved positive results.

The total trade turnover in July exceeded 70 billion USD for the first time, of which exports reached a record of over 36 billion USD, marking the month with the highest export value ever.

In the first seven months, export turnover reached 266.9 billion USD, up 15.7% over the same period last year. Import turnover stood at 212.9 billion USD, up 18.5%.

During those months, there were 10 import items with a value exceeding 5 billion USD, including electronics, computers and components, common metals, phones and components, machinery, equipment, tools and spare parts.

According to the forecast of MB Securities Joint Stock Company (MBS), exports will grow by 11 % - 12 % in 2024, with a trade surplus of 12-14 billion USD.

This growth is based on the World Bank's forecasts on the global trade in goods and services increasing by 2.5% in 2024 and 3.4% in 2025. Positive signs of FDI in Vietnam are expected to play an important role in trade activities.

In addition, recent reforms in trade and customs policies have improved the efficiency of import-export management, simplified administrative processes and reduced costs and time for businesses.

Petrovietnam Securities Incorporated (PSI) also noted that consumer confidence is showing signs of recovery. The consumer confidence index on economic conditions in key markets, such as the EU and UK, also recorded slight recovery,

In addition, the number of new orders from the US, Vietnam's key export market, increased, showing more optimism about this market's demand in the future.

Therefore, PSI expects purchasing power in major export markets to recover more strongly in the second half of 2024.

Although the US has not recognised Vietnam as a market economy, PSI still maintains a positive view on Vietnam's export enterprises this year because the US is still Vietnam's largest export market, reported the Doanh nghiep Vietnam (Vietnam businesses) magazine.

Many challenges

However, MBS believed that Vietnam's export growth until this year end will face many challenges, such as a spike in shipping costs due to geopolitical conflicts; and increasing competition from rival exporting countries such as China, Indonesia and Thailand.

Other challenges are negative impacts from the US's prolonged high interest rates on Vietnam's partner countries, leading to a decline in market demand.

Moreover, Vietnam's economy is highly open, so it also is greatly exposed to global economic developments. This brings difficulties for industries with large export turnover such as textiles, wood and electronics.

According to the Ministry of Industry and Trade (MoIT), although the export market has seen signs of recovery, the export recovery of products is still uneven and unstable.

Vietnam's key export products to such major markets as the EU and the US are facing pressures from trade defence investigations, origin fraud and technical barriers related to the environment, sustainable development and green transformation.

The world economic situation still faces many difficulties and challenges, while the slow recovery of global trade, consumption and investment has affected the domestic economy.

Industrial enterprises, especially export ones, continue to face difficulties in expanding and diversifying markets due to high input material costs and compliance costs, especially with new regulations and standards. Lending interest rates are gradually decreasing, but they are still at a high level.

Therefore, the General Statistics Office recommended synchronously and effectively implementing some groups of solutions. Of which, it is necessary to continue to popularise incentives in free trade agreements (FTAs) and maximise market opening opportunities, boost exports and improve the efficiency of exporting Vietnamese goods to markets that have signed FTAs with Vietnam.

The country should continue to innovate trade promotion activities, focusing on digital transformation programmes in the trade promotion activities and connecting supply and demand both home and abroad.

At the same time, it is necessary to improve efficiency in customs clearance for import and export goods at border gates between Vietnam and other countries and promote transition to official exports.

Trade surplus growth in 2025

The industry and trade sector strives to maintain a trade surplus of 15 billion USD in 2025 and gain a growth of 6% in export revenue turnover compared to 2024.

To reach this goal, the MoIT will continue to promote breakthrough strategies and restructure sectors and fields to improve productivity, quality, efficiency and competitiveness.

The ministry will also focus on institutional reform and development of a favourable business environment to support enterprises in restoring production and business, and implementing important projects.

At the same time, negotiation about new FTAs and upgrading of existing ones will be carried out selectively to take full incentives from signed FTAs, aiming at expanding import and export markets and diversifying partners and goods suppliers and minimising dependence on certain markets.

The ministry will also implement preventive measures, improve trade defense capacity and early warning and resolve international trade and investment disputes to protect the legitimate rights of domestic manufacturing industries as well as businesses and people.

It will strongly develop the domestic market and Vietnamese brands, and promote e-commerce.

In addition, trade promotion conferences with Vietnam trade offices abroad will be held regularly with updates on foreign markets and new regulations and standards, making recommendations to localities, business associations and businesses to adjust production plans and find suitable orders.

In particular, the ministry will accelerate the negotiation of the Comprehensive Economic Partnership Agreement (CEPA) between Vietnam and the United Arab Emirates (UAE), and deploy various trade promotion programmes in both direct and online forms, to take all opportunities from the implemented FTAs.

Source: VNA

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Risk Warnings and Disclaimers

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Thomas

Economic

Thailand's economic expansion accelerated in the second quarter due to stronger consumption, tourism and exports but quarterly growth slowed, with the outlook clouded by policy uncertainty following a change in government.

Gross domestic product grew 2.3% in the April-June quarter from a year earlier, National Economic and Social Development Council (NESDC) data showed, versus an upwardly revised 1.6% in the first quarter and beating 2.1% forecast in a Reuters poll.

Growth in Southeast Asia's second-largest economy was driven by improved government consumption, export of goods and services as well as private consumption, while public and private investments contracted, the state planning agency NESDC said in a statement.

However, on a quarterly basis, GDP grew a seasonally adjusted 0.8% in the second quarter, slower than an upwardly revised 1.2% expansion in the previous three months and 0.9% growth forecast in the poll.

"We expect it to decelerate a bit further in the coming quarters as the boost from tourism fades and with uncertainty around fiscal policy now elevated," Capital Economics said in a note, predicting interest rate cuts from October.

The central bank left its key interest rate unchanged at a decade-high of 2.50% for a fourth straight meeting in June, and is expected to hold the rate again when it meets on Aug. 21.

The NESDC now expects GDP growth of between 2.3% and 2.8% this year, narrowing from its previous forecast range of 2.0% to 3.0%. The economy grew 1.9% last year.

Thailand's economy has lagged regional peers as it faces high household debt and borrowing costs as well as sluggish exports amid a slowdown in top trading partner China.

The outlook is further clouded by political turmoil after last week's court order removed former Prime Minister Srettha Thavisin for violating the constitution over a cabinet appointment.

Political neophyte Paetongtarn Shinawatra, daughter of divisive former Prime Minister Thaksin Shinawatra, was endorsed as prime minister on Sunday but has yet to form a cabinet.

Paetongtarn, who has not served in government previously, faces challenges, with the economy floundering and the popularity of her Pheu Thai party dwindling, having yet to deliver on its flagship 'digital wallet' cash handout programme worth 500 billion baht ($14.5 billion).

The government needs to introduce stimulus measures, NESDC head Danucha Pichayanan told a press conference.

"Stimulating the economy through consumption will help support the economy and solve people's livelihood problems," he said.

The planning agency maintained its export growth forecast at 2% for this year.

The economy has been supported by tourism, and the agency still expects 36.5 million foreign tourists this year. There were a record of nearly 40 million foreign tourists in 2019, before the pandemic.

($1 = 34.43 baht)

Source: Reuters

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[Quick Facts]

1. Global bond traders are increasing positions in case inflation spikes.

2. "Harrisonomics": A strong middle class makes America strong.

3. Wall Street bets Powell will confirm a rate cut.

4. Fed's Daly: Monetary policy and economic mismatch will lead to unintended consequences.

5. Israel and Hamas remain divided on key cease-fire issues.

6. U.S. consumer confidence remains stable, presidential election in focus.

[News Details]

Global bond traders are increasing positions in case inflation spikes

As bond traders grow increasingly confident that inflation is finally under control, a group of investors is quietly building defensive positions to guard against a potential surge in inflation. These fund managers are increasing positions to cushion fixed-income returns in the event of an inflation shock. Wall Street strategists also recommend taking advantage of the decline in market-based future inflation indicators to build defensive positions.

With rate cuts now seeming inevitable, and recession concerns overtaking inflation as the main worry. Some investors say this hopeful outlook has driven benchmark bond yields sharply lower, though some believe the drop might be too steep. "We think fear of recession is overdone, but that inflation risks are possibly underpriced at current yield levels," said John Bilton, head of multi-asset strategy at J.P. Morgan Asset Management. Bilton said he remains "broadly neutral" on duration, or exposure to interest-rate risk, given that there are "a handful of forces that could push inflation higher."

"Harrisonomics": A strong middle class makes America strong

U.S. Vice President Kamala Harris recently outlined proposals as part of her "Opportunity Economy" plan, which she intends to implement if she wins the White House. These include tax cuts for most Americans, banning price gouging at grocery stores, and building more affordable housing. In her first major economic-themed speech as the Democratic presidential nominee, Harris promised a new child tax credit of up to $6,000 for families with young children, tax cuts for families with kids, and lower prescription drug costs.

Harris also called for the construction of 3 million new homes over the next four years and proposed tax incentives for home builders who construct homes for first-time buyers. Speaking to supporters at a rally in North Carolina, Harris said that the U.S. economy is strong, but prices are still too high. She pledged that if elected president, she would focus on the middle class, stating, "I firmly believe that when the middle class is strong, America is strong."

Wall Street bets Powell will confirm a rate cut

Wall Street is betting that Federal Reserve Chair Jerome Powell will confirm an upcoming rate cut at the Jackson Hole Symposium. However, as the focus shifts from "whether there will be a rate cut" to "how big the cut will be," stock traders might be disappointed. "If traders hear about an imminent rate cut, the stock market will react positively. If they don't hear the desired information, it could trigger a massive sell-off," said Eric Beiley, Managing Director at Steward Partners Global Advisory.

The market is fully expecting the Fed to start cutting rates at the September meeting. But Powell may still stay tight-lipped about the timing of the cuts in his Friday speech. Given his cautious stance, he may reveal the Fed's path forward in a careful and ambiguous manner, especially regarding how much rates might drop. If Powell does not say this is the future path, it could be a major surprise.

Fed's Daly: Monetary policy and economic mismatch will lead to unintended consequences

FOMC voting member Mary Daly said that the Fed does not want to "over-tighten monetary policy when the economy is slowing down." She added that failing to adjust policy to the progress of inflation and the slowing economy "could lead to unintended consequences, such as stable prices but an unstable and shaky labor market."

Her comments align with the views of Atlanta Fed President Raphael Bostic, who recently said that waiting too long to cut rates "certainly carries risks." The weak jobs report in July raised concerns about the health of the U.S. economy and contributed to a sell-off in global markets. Daly noted that companies typically do not resort to layoffs. Instead, they are now cutting discretionary spending to adapt to a world that is no longer a bubble of unchecked growth.

Israel and Hamas remain divided on key cease-fire issues

On August 16, a new round of ceasefire talks for the Gaza Strip continued in Doha, Qatar. Qatar, Egypt, and the United States issued a joint statement saying that the past two days of talks were constructive. Negotiations will continue in Cairo next week, with hopes of reaching an agreement then.

There are still disagreements over the Israeli military's control of the Netzarim Corridor and the Philadelphi Corridor within the Gaza Strip, an Israeli official involved in the talks revealed to Israeli media on August 16. Meanwhile, a Hamas official told the media that the transitional proposal submitted by the mediators did not align with the Gaza ceasefire agreement that Hamas agreed to in early July. On August 16, AFP cited an anonymous Hamas source saying that Hamas would not accept the new conditions proposed by Israel.

U.S. consumer confidence remains stable, presidential election in focus

The University Of Michigan's preliminary reading on the overall index of consumer sentiment came in at 67.8 in August. The one-year-ahead inflation expectations stood at 2.9%, and the reading of five-year-ahead expectations was 3%. The index has remained nearly flat for the fourth consecutive month, with just a slight increase of 1.4 points, according to Joanne Hsu, director of UMich's consumer surveys. Expectations strengthened for both personal finances and the five-year economic outlook, which reached its highest reading in four months. The survey shows that 41% of consumers believe that Harris is the better candidate for the economy, while 38% chose Trump. Consumer expectations are subject to change as the presidential campaign comes into greater focus.

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