Monday’s “delta-dip” receded further into the rear-view mirror overnight, as US stocks edged higher and US yields fell after the overnight US 10-Year TIPS auction went at a record low yield. Interestingly, the US Treasury cancelled two upcoming auctions due to ample cash balances. The approaching Federal debt ceiling limit has been off the radar this week, but I suspect it will rear its bi-partisan head once again next week, mixed in with a heady tonic of infrastructure voting. For now, markets seem unconcerned about either with delta or inflation, keeping the buy-everything music playing.


US Initial Jobless Claims also disappointed overnight but were quickly dismissed as “seasonal.” I won’t disagree with the US summer holiday season in full swing; pandemic be damned. The European Central Bank policy decision was also greeted with market apathy, much to my surprise. Lower for longer and QE forever was the non-unanimous decision along with the concrete 2.0% inflation target. The Japanification of monetary policy, over a decade and still going, should have been negative for the euro versus the US dollar. Still, it appears that markets had already priced in this monetary policy mediocrity.


Indonesia’s central bank downgraded growth yesterday and also set out its stall for lower for longer, although it left its policy rate unchanged, with one eye also on the currency. Ironic, really, as my flirtation with Mr Delta here in Jakarta has left me literally temporarily one-eyed as well. Testing increased, and labs reopened fully after the weekend and Eid holiday lull, and sure enough, cases spiked to 50,000 with nearly 1,500 deaths yesterday. Along with Thailand and Malaysia, Indonesia remains on edge, and all three countries’ currencies are unlikely to see any benefit from a weaker US dollar into next week, should that occur.

Australian PMIs a mixed bag

Australia’s Flash PMI data this morning was a mixed bag. Flash Manufacturing remained strong at 56.8, but Flash Services PMI for July cratered to 45.2, with around half the country in some sort of Covid-19 lockdown. Even if heavyweight markets in the northern hemisphere are “delta-dismissing” at the moment, MCO’s in Malaysia, PPKM’s in Indonesia and state restrictions in Australia, to name but a few, mean that ASEAN markets will need a frank re-evaluation of their recovery trajectories for 2021. I expect ASEAN equity markets to underperform the recovery behemoths of New York and Europe over the next few months until we see a “Delta Dawn, what’s the flower you have on?”


Japan markets are closed for a national holiday once again, which is likely to reduce liquidity and volatility in Asia, notably in currency markets. Thailand releases its Balance of Trade with a surplus expected to hold around USD 1.0 billion for June. Under the cover, virus restrictions are likely to have hampered manufacturing while pushing up imports. Movement Control Order’s (MCO) in Malaysia will have done the central bank a favour today by pushing June Inflation YoY back under 4.0%. A favourable outcome for all the wrong reasons.


Similarly, Singapore Core Inflation for June YoY should hold steady at 0.80%, with Headline Inflation holding steady at 2.50% as the endless tail-chasing cycle of lockdowns/not lockdowns saps consumer demand. Singapore is streets ahead with its vaccination programme, though, and once it gets past these next two months, that should enable the city-state to be an outperformer in the ASEAN crowd into Q4.


German, French Eurozone and US Markit PMI’s this afternoon will be of passing interest to financial markets in a thin data calendar week. To shake the confidence of the FOMO “delta-doubters,” though, we would need to see some serious downside surprises in the headline numbers. With some impressive post-close US tech earnings results this morning, no one is going to want to spoil the end of week post-delta-dip party unless they’re forced into it.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes.

He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.

A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others.

He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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