Commerzbank’s report on Taiwan notes that stronger inflation, with core CPI at 2.5%, is prone to push the CBC in direction of a extra hawkish stance, together with a doable 12.5 bp hike in H2. Regardless of strong AI-driven exports and agency home demand, USD/TWD has risen to 32.19, although analysts count on a possible pullback as soon as seasonal dividend outflows fade.
Hawkish CBC and AI-led progress
“Taiwan’s June inflation shocked on the upside, with headline CPI rising to 2.6% yoy from 2.2% in Might. This was the quickest tempo since January 2025 and nicely above the Central Financial institution of the Republic of China’s (CBC) casual 2% threshold. Greater gas, fuel and electrical energy prices have been the primary drivers, however companies inflation remained agency at 2.9% vs 2.5% beforehand.”
“Whereas decrease oil costs ought to assist average headline inflation within the coming months, the pickup in core inflation can be a priority for CBC. It strengthens the case for CBC to show extra hawkish. CBC final hiked the coverage charge by 12.5 bp to 2% in March 2024 and has saved it there since. We might see a 12.5bp hike in H2 this 12 months. The mixture of AI-led earnings positive factors, robust home demand, and chronic companies inflation offers CBC much less scope to look by means of short-term energy-driven value pressures.”
“Regardless of the robust financial efficiency, TWD stays on the backfoot with USD/TWD again in direction of the excessive for this 12 months. Internet seasonal dividend outflows have weighed on TWD, however as soon as this fades, we might see a pullback in USD/TWD.”
(This text was created with the assistance of an Synthetic Intelligence software and reviewed by an editor. Know extra.)
