Asia week ahead: RBA rate hike, data from China, Taiwan, Japan, Korea
Lead — The Reserve Bank of Australia (RBA) is poised to raise rates by 25 basis points, bringing its benchmark to 4.85% as inflation pressures persist. This rate decision coincides with a critical week for economic data releases across Asia, notably China's PMI figures, which are expected to reflect a slight softening. Per the full note , with underlying inflation trends in Australia continuing upward, the case against further tightening is weakening. Such developments may reshape market positions and expectations heading into December, especially with multiple Asian economies reporting significant data soon.
What the desk is arguing
The desk anticipates that a 25 basis point hike by the RBA to 4.85% will occur, backed by robust inflation readings that have consistently outperformed expectations. Per the full note , headline inflation increased by 90 basis points from July to September, reaching 4.3% year-on-year, with contributions from fuel prices and an uptick in both goods and core services inflation, indicating persistent inflationary pressures.
Furthermore, with core inflation not exhibiting a noticeable decline, the RBA's tightening path remains firmly on course. As deep-rooted inflation issues loom, the RBA appears reluctant to adopt a pause, highlighting the strong likelihood of the upcoming rate hike.
Where it sits in our coverage
Our consensus shows a target of 1.075 with a range from 1.04 to 1.12, which reflects a more cautious approach in comparison to a robust outlook following potential rate hikes. Aligned firms include:
- jpmorgan (target: 1.10, tenor: Mar26)
Currently, this position aligns closely with jpmorgan's target, suggesting a consensus alignment on expected economic conditions. The desk's expectation for the RBA may be on the upper end of the spectrum.
How other firms see it
Firms such as jpmorgan are observing a positive scenario regarding rate hikes, while bofa holds a contrary view focused on a more cautious position towards the Australian dollar's strength. The divergence sets a framework that traders should watch closely.
Market participants should also keep their eyes on AUD/USD trajectories, as movements here will likely reflect shifts in RBA policy and regional economic responses. The Australian currency's dynamics could hinge heavily on upcoming data releases from Asia, particularly the PMI figures from China, that could shift sentiment rapidly depending on outcomes.
What the calendar says
Looking ahead, the key data releases including China's PMIs will provide critical context for investor sentiment regarding Asian economies. As Australia's own rate decision looms, these indicators could serve as significant catalysts influencing AUD trading patterns.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01RBA expected to raise rates by 25bp to 4.85% amid persistent inflation pressures.
- 02China's PMI data is anticipated to show slight softening, impacting regional sentiment.
- 03The upcoming week's economic data releases could significantly influence market positioning.
- 04Market participants should monitor the implications of these data on AUD strength.
Market implications
Traders should watch the 4.85% level closely, as it marks the RBA's anticipated rate adjustment. Additionally, the release of China's PMI figures this weekend could provide a critical signal about the economic direction in Asia, potentially influencing AUD/USD volatility.
Risks to this view
A significant drop in inflation figures or unexpected weakness in China’s PMIs could undermine the case for further rate hikes by the RBA. Should domestic inflation trends reverse, the RBA may reconsider its tightening strategy, thus impacting AUD/USD dynamics.
Articles Asia week ahead: RBA rate hike, data from China, Taiwan, Japan, Korea Published 03:54 Asia week ahead Australia China Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The Reserve Bank of Australia is expected to hike rates by 25bp to 4.85%. Elsewhere, markets will be watching a raft of key regional data releases, including China’s PMI figures, South Korea’s trade and inflation data, Japan’s wage growth numbers and Taiwan’s latest inflation reading Deepali Bhargava and Lynn Song Asia Research highlights of the week RBA set to hike as inflation proves more persistent Australia: RBA expected to hike rates by 25bp We expect the Reserve Bank of Australia to raise its policy rate by 25bp to 4.85% on Tuesday rather than wait until December. Headline inflation rose by 90bp between July and September to 4.3% year-on-year.
Fuel prices largely drove the increase, while goods, services, and core inflation also picked up. With underlying inflation not yet on a sustained downward path, the case for a pause remains limited. China: Official PMIs expected to soften slightly China releases October purchasing managers’ index data on Saturday.
We look for both manufacturing and non-manufacturing PMI data to cool slightly, down to 49.8 and 50.1, respectively. The RatingDog PMI is due on Monday. It's expected to continue outperforming other gauges, reflecting its more export-oriented respondent base.
Markets are forecasting a reading of 52.0. Taiwan: Inflation expected to remain elevated Taiwan releases its CPI inflation data Thursday. We expect inflation to remain hot in October at around 2.7% YoY.
After last month’s surprise surge, another month of high inflation would strengthen the odds for a central bank rate hike in December. Korea: Export growth to strengthen as inflation eases South Korea releases October trade data over the weekend. Market consensus expects export growth to accelerate to 89.4% YoY, supported by continued strength in semiconductor and AI-related demand.
Imports are expected to rise to 41.1%. The trade surplus is expected to narrow to US$38.3bn from a revised US$50.0bn. October inflation data will be released Tuesday.
Market consensus expects headline CPI inflation to ease slightly to 2.8% YoY from 2.9%, while core inflation slows to 2.7% from 2.8%. Inflation would nevertheless remain above the Bank of Korea’s target. Strong exports also should continue to support growth and the case for maintaining a restrictive policy stance.
Japan: Wage growth expected to remain firm Japan releases its September labour cash earnings data on Thursday. Market consensus expects nominal wage growth to ease slightly to 3.8% YoY from a previously revised 3.9%. Real earnings growth is seen slowing to 1.3% from a revised 1.6%.
Firm wage growth should support further Bank of Japan tightening amid elevated inflation and negative real interest rates. Key events in Asia next week Taiwan Korea Japan China Austria Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Deepali Bhargava Regional Head of Research, Asia-Pacific Deepali Bhargava joined ING in 2024 and is Head of Research and Chief Economist Asia-Pacific. She has over 19 years of work experience as a macro specialist covering rates, FX and equity markets… Lynn Song Chief Economist, Greater China Lynn Song joined ING in January 2024 as the Chief Economist for Greater China. Prior to joining ING, he worked at China Construction Bank International, China Merchants Securities (HK), and Haitong… In this article Asia Research highlights of the week Australia: RBA expected to hike rates by 25bp China: Official PMIs expected to soften slightly Taiwan: Inflation expected to remain elevated Korea: Export growth to strengthen as inflation eases Japan: Wage growth expected to remain firm
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