The Philippine peso continued its strong downward trend and is now hovering near its all-time low as the country’s economy remains under pressure amid the ongoing US-Iran war. The USD/PHP exchange rate was trading at 60.65, a few points below the all-time high of 60.75.
The Philippine economy is facing major headwinds
The USD to PHP exchange rate has continued soaring this year as the Philippines has emerged as one of the most affected economies during the ongoing US-Iran war.
The country imports most of its oil and gas from the Middle East. As a result, it is now in a full-blown fuel crisis, with hundreds of fuel stations closing and oil prices soaring in the country. The government has declared a state of emergency as gasoline jumped to 12 pesos per liter.
Analysts now expect that the country’s inflation will continue rising in the coming weeks, with the central bank predicting that the headline Consumer Price Index (CPI) will jump to between 3.1% and 3.9%, the highest level since 2024.
The bank has placed its average inflation forecast for this year to 5.1% from the previous estimate of 3.6%. That inflation rate would be much higher than its target of between 2% and 4%. As a result, there is a likelihood that the bank may decide to hike interest rates, a move that may impact economic growth. In a note, an analyst said:
“The BSP will likely become more agile amid this fluid situation to make the necessary tightening adjustments to ensure that the economy does not suffer further from this crisis.”
Federal Reserve to cut interest rates?
On the other hand, there are signs that the Federal Reserve may decide to cut interest rates later this year as its concerns about the labor market outweigh those of inflation.
The odds of a cut are visible in the bond market, where the ten-year fell to 4.327% and the 2-year slipped to 3.81%.
Data compiled by Polymarket shows that the odds of one interest rate cut happening this year jumped to 24%.
Most analysts expect the US consumer inflation to remain at an elevated level as gasoline and diesel prices surge. The average gasoline price has jumped to $4, while diesel is trading at $6.
In a report last week, the OECD predicted that the US inflation will jump to above 4.2% this year if energy prices continue soaring.
USD/PHP forecast: Technical analysis
USD to PHP chart | Source: TradingView
The weekly timeframe chart shows that the USD to PHP exchange rate formed a strong bottom at 55.22, its lowest level in December 2023, January 2024, and May 2025.
It has now jumped above the important resistance level at 59.15, its highest point in December 2024. It also moved above 59.14, its highest swing in January this year.
The pair has remained above all moving averages, while the Percentage Price Oscillator (PPO) and the Percentage Price Oscillator (PPO) have continued rising.
Therefore, the pair will likely keep rising as bulls target the next resistance level at 63. However, there is also a possibility that the pair will retreat to 59.15, the highest point in July and November 2024. This pattern is known as a break-and-retest pattern, which often leads to more upside.
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