The Thai baht slightly strengthened against the US dollar today, supported by signals of a potential interest rate cut by the US Federal Reserve (Fed) amidst growing concerns about an economic recession.
SCB Financial Markets (SCBFM), the treasury market division of Siam Commercial Bank, predicts the baht to trade within the range of 36.80-37.00 baht per dollar today. They noted that the baht had already appreciated slightly yesterday due to a weakening US dollar index and falling US Treasury yields.
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Recent weak US economic data has significantly influenced market expectations regarding the Fed’s monetary policy. In particular, the higher-than-expected continuing jobless claims, reaching their highest level since late 2021, and the contraction of core capital goods orders by -0.6% month-over-month, suggest a potential slowdown in the US economy.This could prompt the Fed to consider cutting interest rates this year.
The appreciation of the baht could impact Thailand’s export sector, as Thai goods and services become more expensive for foreign buyers. However, it could benefit Thai importers and consumers as imported goods and services become cheaper.
Sucheera Pinijparakarn from SCBFM commented, “The baht has strengthened slightly against the US dollar due to a weakening US dollar index and falling US Treasury yields.” She added, “The weak US economic data has led the market to expect the Fed to cut interest rates this year.”
Meanwhile, the German Finance Minister has warned that if the European Central Bank (ECB) takes measures to lower French bond yields, it could be illegal. This issue could potentially impact financial markets in Europe and globally.
The strengthening baht and signals of a Fed rate cut are crucial developments to watch in the financial markets. These factors could have a significant impact on both the Thai and global economies.
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