THE PESO may stay at the P55 level this week as the dollar may remain under pressure as markets await developments in the ongoing tariff negotiations between the United States and its major trading partners.

The local unit closed at P55.57 per dollar on Friday, up by 27 centavos from its P55.84 finish on Wednesday, Bankers Association of the Philippines data showed.

This was the peso’s best close in more than a year or since its P55.53-a-dollar finish on March 15, 2024.

Week on week, the peso surged by 69.5 centavos from its P56.265 close on April 25.

The peso was stronger on Friday following weak US gross domestic product (GDP) and manufacturing data due to the Trump administration’s shifting policies, a trader said in a phone interview.

The US economy contracted for the first time in three years in the first quarter, swamped by a flood of imports as businesses raced to avoid higher costs from tariffs and underscoring the disruptive nature of President Donald J. Trump’s often chaotic trade policy, Reuters reported.

Economists anticipated the economy would rebound in the second quarter as the drag from imports fades, but probably not enough to avoid a recession or a period of tepid growth and high inflation, commonly referred to as stagflation. Resolving the uncertainty caused by the Trump administration’s ever-shifting tariffs position was crucial, they said.

Gross domestic product decreased at a 0.3% annualized rate last quarter, the first decline since the first quarter of 2022, the Commerce department’s Bureau of Economic Analysis said in its advance estimate of first-quarter GDP.

It was also weighed down by a decline in federal government spending, likely linked to the White House’s aggressive funding cuts, marked by mass firings and shuttering of programs.

The report captured activity before Mr. Trump’s “Liberation Day” tariffs announcement, which ushered in sweeping duties on most imports from the United States’ trade partners, including jacking up duties on Chinese goods to 145%, sparking a trade war with Beijing.

Economists polled by Reuters had forecast that GDP increased at a 0.3% pace in the January-March period.

A separate report showed US manufacturing contracted further in April, while tariffs on imported goods strained supply chains, lifting prices paid for inputs and keeping the narrative on stagflation alive and well.

The Institute for Supply Management’s manufacturing purchasing managers’ index (PMI) dropped to a five-month low of 48.7, which was slightly higher than expected, compared with a reading of 49.0 in March. A PMI reading below 50 indicates contraction. Economists polled by Reuters had forecast the PMI declining to 48.

The peso was also supported by increased remittances from overseas Filipinos before the start of a new school year in the coming weeks, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

For this week, US nonfarm payrolls data released on Friday could drive peso-dollar trading, the trader said.

US job growth slowed marginally in April and employers continued to hoard workers, but the outlook for the labor market is increasingly darkening as Mr. Trump’s protectionist trade policy heightens economic uncertainty, Reuters reported.

The Labor department’s closely watched employment report published on Friday, which also showed the unemployment rate held steady at 4.2% last month, helped to assuage fears that the economy was nearing recession after GDP contracted in the first quarter amid a tariff-induced flood of imports. Nonetheless, it is too early for the labor market to show the impact of Mr. Trump’s on-and-off again tariff policy.

Nonfarm payrolls increased by 177,000 jobs last month after rising by a downwardly revised 185,000 in March, the Labor department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast 130,000 jobs added after a previously reported 228,000 advance in March.

“The market will also be closely monitoring trade talks between the US and China,” the trader added.

The release of April Philippine inflation data on Tuesday and the Federal Open Market Committee’s policy meeting this week could also affect the local unit, Mr. Ricafort said.

He said the peso could move between P55.40 and P55.90 per dollar this week, while the trader expects it to range from P55.50 to P56.

A BusinessWorld poll of 14 analysts yielded a median estimate of 1.8% for the April consumer price index (CPI). This is within the Bangko Sentral ng Pilipinas’ (BSP) 1.3% to 2.1% forecast for the month.

If realized, April inflation would be steady from the March print and be sharply slower than the 3.8% clip logged in the same month in 2024.

This would also mark the ninth straight month that the CPI settled within the BSP’s 2-4% target range. — A.M.C. Sy with Reuters