Excerpt from DBS Bank Ltd report.

Report Summary

• The US economy is showing mixed signals: while consumer spending remains robust and private investment (especially in AI) is surging, the labor market is cooling and business hiring intentions are weak.
• US-China trade tensions have reduced bilateral trade, but the US is increasing imports from other regions, leading to a persistent and growing overall trade deficit.
• Policy uncertainties (tariffs, government shutdown risk, immigration) and public sector drag are key headwinds, though 1.5-2% US GDP growth is still expected in the near term.
• Central banks in Asia are mostly maintaining or easing rates, with Thailand and the Philippines highlighted for their upcoming decisions amid subdued inflation and softening growth.
• Japan will see its first female Prime Minister, Sanae Takaichi, who supports continued fiscal and monetary stimulus, which could lead to increased market volatility and steeper yield curves.
• FX markets remain volatile due to US political risks, potential US-China trade deals, and changing monetary policy expectations, particularly for the JPY, NZD, and USD.
• Despite a US government shutdown, risk sentiment remains strong in credit and equity markets, with credit spreads at new lows and complacency a possible risk.
• Forecasts show moderate growth and inflation across Asia and the US, with expectations for gradual monetary easing and stable-to-strong Asian currencies in 2025-2026.