NJA: Weak China data expected; potential ECB easing could lift USD/Asia again

The USD/Asia retracement has extended this week, with soft US data further pushing back market expectations of Fed rate hike. Moreover, a less aggressive easing by the MAS (relative to market expectations) and an unchanged policy by the BoK, with no notable concerns about KRW strength, drove further short covering in Asian currencies. Consequently, Asia FX has outperformed other EM currencies in the latest USD-EM pullback, led by previous underperformers such as the IDR and MYR. However, for the next few weeks, potential additional easing by ECB and BoJ, along with downside risk to Chinese economic data, could drive a rebound in USD/Asia.

In terms of data releases, China will be in the spotlight amid a light week for Asia. China GDP growth is expected to slow to 6.5 % y/y in Q3 from 7.0% in Q2 (consensus: 6.8%), as a faster-than-expected slowdown in property and manufacturing investment and sluggish export growth point to a weakening of GDP growth in Q3. 

"We are looking for a further moderation in y/y IP growth (Barclays: 5.7%; consensus: 6.0%; last: 6.1%), given tepid PMIs, and expect FAI to slow further in YTD terms partly due to a high base (Barclays: 10.6%; consensus: 10.8%; last: 10.9%)", says Barclays.

Elsewhere, Korea's Q3 GDP may come in better than expected (consensus: 0.6%), given recent signs of a recovery in domestic demand. Singapore's September CPI inflation is likely to stay subdued, and Taiwan IP's will likely extend its contraction for the fifth consecutive month.