EM Asian currencies likely to benefit from risk appetite, remain susceptible to progress in GOP tax reform plan: Scotiabank

The emerging market Asian currencies are expected to benefit from risk appetite for now while remaining susceptible to any progress in the GOP tax reform plan. It would weigh on regional currencies should UST yield curves bear-steepen again, according to reports from Scotiabank.

US consumer price index rose 0.5 percent m/m in September, the second big increase in a row and the largest in eight months. It pushed the annual rate of inflation to 2.2 percent from 1.9 percent to mark a six-month high.

"We believe strong US private wage growth will lead to an uptick in the nation’s inflation into the year of 2018 as the Phillips Curve is expected to take effect finally," the report said.

Fed Chair Yellen said Sunday at the Group of Thirty’s Annual International Banking Seminar in Washington that she expects US inflation to move higher next year with the ongoing strengthening of labor markets. The Fed will continue to raise interest rates gradually, according to Yellen.

Meanwhile, US Senator Susan Collins said Sunday that she’s leaning toward supporting a fiscal 2018 Senate budget resolution that would set up a procedure to allow Republicans to pass a tax bill by a simple majority. In addition, it is well expected that ECB policymakers will agree at the October 26 meeting to the specifics of how much debt the eurozone’s central banks will buy in the coming year.

Bloomberg reported last Friday morning that ECB officials are considering cutting their monthly bond purchasing to EUR30 billion from the current pace of EUR60 billion starting in January and extending the so-called QE programme by nine months through the end of September 2018, citing sources familiar with the debate. ECB President Mario Draghi told reporters in Washington on Saturday that the central bank will maintain "an extraordinary degree of monetary accommodation".

Meanwhile, FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest