The economy’s narrowing current account deficit and softening US inflation may limit further depreciation of the peso.

The Experts

Markets steady as analysts attempt to predict timing of rate cuts

Global stocks were rangebound as they attempted to push for new highs.

FWD Investment Team

Global and Philippine Market Update

May 16 to May 22, 2023


Global Markets 

Global Stocks were rangebound as they attempted to push for new highs.

  • Federal Reserve Governor Christopher Waller believes that April inflation data indicates that progress towards the 2% inflation target has resumed. While acknowledging that one month of data does not establish a trend, he noted that moderating demand supports efforts to lower inflation. His optimistic tone contrasts with more cautious outlooks of other Fed officials. However, Waller emphasizes that a weakening labor market is necessary before he can support monetary easing.
  • UK inflation fell to 2.3% in April, down from 3.2% in March, marking the first time it has been below 3% since July 2021. However, economists were disappointed as they had expected inflation to drop to 2.1%. This is likely to prevent the Bank of England from reducing rates in June and puts doubt on whether they can cut by August.
  • According to author Nassim Taleb, a distinguished scientific advisor at Universa Investments, people should focus on the Middle East from a humanitarian perspective but disregard it as investors. He asserts that the connection between markets and events in the Middle East is completely unpredictable. For instance, despite the surprising helicopter crash that killed Iranian President Ebrahim Raisa, markets showed little reaction, with major indices remaining steady.


Philippine Stocks

Philippine Stocks trended higher in an attempt to gather momentum.

  • Infrastructure spending increased by 15% in March as the government accelerated disbursement for public works and defense modernization projects, according to the Department of Budget and Management (DBM). This significant rise was mainly due to the strong spending performance of the Department of Public Works and Highways (DPWH). The government has become more efficient in disbursing public funds compared to previous years. Boosting infrastructure spending is crucial to driving economic activity, as weak spending in 2023 and early 2024 contributed to slower growth.
  • Pantheon Macroeconomics predicts that muted remittance growth in the coming months will continue to dampen household spending. Remittance inflows slowed to 4.6% year-on-year in March, and growth in peso terms has been below the historical average for the past 10 months. Cash remittances are crucial for household spending, which accounts for about three-fourths of the economy.


Philippine Bonds

Philippine Bond yields stayed elevated due to heightened fears of higher inflation.

  • The Bangko Sentral ng Pilipinas (BSP) maintained its benchmark interest rate at 6.5% for the fourth consecutive meeting, signaling a potential delay in rate cuts due to inflationary pressures. BSP Governor Eli Remolona Jr noted that while inflation remains within target, the trajectory has shifted higher. He highlighted elevated transport fares, food prices, and increasing electricity and oil prices as contributing factors, alongside the possibility of wage hikes, aggravating upside risks to inflation.
  • A prolonged depreciation of the peso could push inflation higher but may also benefit export earnings. The exchange rate closed above Php 58 against the US dollar, its weakest level in 18 months. The peso has been weaker than regional peers due to the central bank’s “dovish” tone. However, the economy’s narrowing current account deficit and softening US inflation may limit further depreciation of the peso.


FWD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.

Sources: (1) (2) (3) (4) (5) (6) (7) tps://

Disclaimer: The purpose of this article is to inform and should not be taken as an advice or offer to purchase securities. Seek professional advice before making a decision based on this presentation. Information given does not represent the views of FWD and its agents and employees.