The Thailand SET closed at 1568.29, down 1.18% for the week. The Commerce Ministry said on Monday that the headline consumer price (CPI) index fell to a seasonally adjusted annual rate of -0.52% in February, down from a rate of -0.41% in January. The core CPI excluding volatile energy and food prices rose to 1.45% year on year, compared to an increase of 1.64% in January.

The Commerce Ministry cut its 2015 inflation target to 0.6-1.3% from the previous forecast of 1.8-2.5%, citing continuations in the decline of oil prices and sluggish economic growth. 

The Thailand 10-Year Government bond yield fluctuated between 2.63% and 2.73% for the week. The capital outflows and foreign investor selling might pick up again as the yield spread between the U.S. 10-Year Treasury, now yielding 2.2467%, and the Thailand 10-Year Government bond has narrowed to 0.4833%.

The Thailand SET didn’t get much support from the announcement on Saturday by the People's Bank of China (PBoC) for a 25 basis point cut in both the benchmark interest rate and deposit rate. The rate cut may stimulate domestic demand but mostly targets support of Chinese exports and to reduce domestic deflationary pressures by weakening the yuan. 

The Mainland yuan (CNH) and Thai baht (THB) exchange rate rose 0.81% from 5.1616 baht per yuan last Friday to 5.2033 baht per yuan for the week. So far this year, the Thai baht has appreciated as much as 1.88% against the Mainland yuan.

The Bureau of Economic Analysis (BEA), U.S. Commerce Department, said on Monday that personal spending fell 0.2% in January, worse than the expected decline of 0.1%. Weak consumer spending prompted analysts at Morgan Stanley to cut their first-quarter 2015 U.S. GDP growth estimate by five-tenths of a percentage point to a 2.3% annual pace, according to Reuters. 

One of the reasons for weak consumer spending, despite cheap oil prices, is because most of the U.S. job growth in the past several years is heavily concentrated in the low-wage service sector, at places like strip malls and fast-food restaurants, according to the New York Times.

On Thursday, ECB president Mario Draghi unveiled the details of the 1 trillion-euro bond buying stimulus plan that will begin on Monday. The plan appeared to disappoint the currency market as the euro-dollar exchange rate dropped to an intraday low of 1.0986 dollars per euro after the announcement.

The euro-dollar exchange rate continued to reel on Friday as the U.S. Labor Department said the U.S. economy added 295,000 jobs and the unemployment rate ticked down to 5.5% in February, exceeding economists’ expectations of a 240,000 jobs gain and an unemployment rate of 5.6%. The euro-dollar exchange rate traded at 1.0844 dollar per euro at the close on Friday, down 3.14% for the week.

The euro-Thai baht exchange rate didn’t fare well either as it tumbled 2.5% from 36.228 baht per euro on Friday last week to 35.3222 baht per euro this week. So far this year, the Thai baht has been appreciated as much as 11.09% against the euro. As the euro-dollar exchange rate heads to parity, Thai exports could be under currency pressure.

The Thailand SET continued to slide as it was unable to break out the short-term resistance (R-R). Nonetheless, the Thailand SET managed to bounce off the pseudo 200-SMA on Thursday and made a 0.96% gain on Friday. The pseudo 200-SMA is the trendline which runs in parallel to the actual 200-SMA. In the SET chart pattern, a bullish falling wedge has emerged. 

One should beware of a dead cat bounce as the trading volume on Friday was considered to be light, less than 10 billion shares traded. The Moving Average Convergence/Divergence (MACD) is still bearish and a Relative Strength Index (RSI) of 44.42 isn’t quite oversold yet. A RSI below 30 is considered to be oversold. 

The Thailand SET might not get much support from the U.S. markets next week as the U.S. broader markets took a nose dive on Friday. The Wall Street pundits are beating their drums for interest rate hikes, sooner rather than later. We think that the Fed is at risk of losing its credibility if the U.S. economy falls backwards after a rate hike as the U.S. consumer spending and inflation are still in the tank.

Mr. William C. Dudley, president of the Federal Reserve Bank of New York, said last Friday that he sees reason for caution on how soon, or how quickly, to raise interest rates.