MUFG analysts Lin Li, Michael Wan, Lloyd Chan and Khang Sek Lee emphasize that the week was focused on Asia, dominated by geopolitics, inflation and monetary policy. They expect the Bank of Korea to keep interest rates unchanged until 2026, the Bank of Thailand to cut them by 25 basis points and China’s key lending rates to remain unchanged until there is clearer policy guidance in March.

Signals from Asian politics influence the currency outlook

“The coming week will be largely focused on Asia, with a focus across the region on geopolitics, inflation dynamics and monetary policy.”

“In particular, we expect the Bank of Korea to keep interest rates unchanged with a tone that is likely to indicate an extension of maintaining key interest rates until 2026 given rising house prices and a volatile currency, with the BOK’s growth forecast also likely to be upgraded at the meeting.”

“Meanwhile, we expect the Bank of Thailand to cut interest rates by 25 basis points given negative inflation and generally weak growth prospects, despite greater relative clarity in recent election results.”

“We also expect China’s key lending rates to remain unchanged, with greater clarity on China’s monetary policy direction potentially expected after the National Party Congress, two sessions and the publication of the full 15th Five-Year Plan in March.”

“Meanwhile, Australia’s January CPI will be the first test following the Reserve Bank’s recent interest rate hike, with inflation expected to fall but remain above target, reinforcing hawkish sentiment while keeping policy unchanged.”

(This article was created with the lend a hand of an artificial intelligence tool and has been reviewed by an editor.)