Market Highlight 15.05.2024

In his speech last night, FED Chairman J. Powell stated that he expects inflation in the U.S to continue to be decreased in the second half of 2024 although his confidence in this has waned after prices rose faster than expected in the first quarter of this year. He also reaffirmed that the next move by the FED will not be an interest rate hike. The U.S central bank remains patient, waiting for the current high policy rate to take effect in curbing inflation.

The USD dipped nearly 0,2% after U.S producer price data unexpectedly rose in April, amid sharply rising costs of goods and services, indicating that inflation remained high at the start of the second quarter. The market participants have lowered their expectations for the FED to implement the first rate cut in September (49% probability) after the PPI data was released. The producer price index may not fully reflect the overall price level in the economy compared to the CPI data, which will be released tonight. What the FED needs is a series of inflation data over 3 to 4 months confirming that prices in the economy are cooling to gain enough confidence in making a decision to cut interest rates. The market participants also fear that inflation in the services sector is becoming more unpredictable, increasing the scenario where the FED might not cut rates this year, or if it does, the interest rate may be only cut once at the end of the year, which is being mentioned more frequently.

The USD/VND interbank exchange rate has been remained stable at around 25.450 for the third consecutive day, driven by strong foreign currency demand in the market. Several large foreign currency purchases for payments, totaling approximately 400 Million USD, were recorded. The SBV yesterday continued to supply an additional 309 Million USD to interbank members, in which the frequency and scale of intervention amount are increasing rapidly. It is estimated that the SBV has sold approximately 950 Million USD to support the market since the end of April at the rate of 25.450.

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