• All eyes on ECB’s meeting later today

• MYR to fluctuate in the range of 4.2230 and 4.2450 against USD

Global Highlights

Dollar Index – The greenback sank 0.42% to 99.875, snapping its 8-session winning streak and erasing early gains ahead of the European Central Bank (ECB) meeting later today. The Producer Price Index increased 11.2% y/y in March 2022 (cons.: 10.6%), the biggest rise on record and is seen as a fallout from the Ukraine-Russia war.

US equities – Wall Street rebounded overnight as the Dow Jones climbed 1.01% to 34,565, S&P 500 rose 1.12% to 4,447 while the Nasdaq added 2.03% to 13,644. The UST 10-year benchmark yield further fell 2.3bps to 2.699%.

Euro – Ahead of the ECB meeting, the euro managed to post a significant daily gain of 0.55% to trade around 1.089. Although it is expected that there will be no interest rate change during the meeting, the market will be on the lookout for a more hawkish tone by the officials as a gradual path leading up to rate hike. On the geopolitical front, Russian President Vladimir Putin said that peace talks with Ukraine were at a “dead end”, dashing any hopes for a resolution in the near term.

British pound – The pound gained 0.89% to 1.312 as the UK’s inflation data prompted market players to raise their expectations of a tightening by the Bank of England (BoE) to reduce inflation. Meanwhile, the Consumer Price Index surged 7% y/y in March, the fastest pace since 1992 from 6.2% (cons.: 6.7%) with prices before the cut in fuel duty was in place.

Japanese yen – The yen weakened 0.19% to 125.62 level as the stance between the Bank of Japan (BoJ) and the US Fed remained opposed to each other. BoJ governor Haruhiko Kuroda stressed the need to maintain an easy monetary policy to support the Japanese economy recover from the pandemic.

Chinese yuan – The USD/CNY pair went up 0.04% to 6.368. Meanwhile, China’s trade surplus increased to US$47 billion from US$30.6 billion in the previous month, driven by the surge in exports by 14.7% y/y and the contraction of imports by 0.1% y/y. Also, the rate premium China has over the US has diminished for the first time in decades with the US 10-year yield now above the Chinese bond yield of the same tenor, which could risk capital outflows from China.

Korean won – The won appreciated 0.68% to 1,227.61 as the currency is currently on a long-term depreciating trend. On the macro front, the unemployment rate in South Korea for March was flat at 2.7% for the second straight month, the lowest level in record and pointing towards recovery in the labour market.

Australian dollar – The Aussie dollar inched down 0.07% to 0.745. The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 0.9% m/m in April, the fifth straight month of contraction amid surging inflation and a potential rate hike.

Commodities Highlights

Crude oil – Despite the big build-up in US crude inventories, oil prices were significantly higher, underpinned by supply shortage worries among investors. Brent surged 3.96% to US$108 per barrel while the WTI soared 3.63% to US$104 per barrel. Meanwhile, US crude oil inventories posted a one-year high increase of 9.38 million barrels per day.

Gold – Gold posted a slight 0.56% increase to US$1,977/oz, still near the one month high it reached previously.

Malaysia Highlights

Malaysian ringgit – The ringgit strengthened 0.03% to 4.231 and traded within the range of 4.2327 and 4.2265. The S&P Global Ratings expects Bank Negara Malaysia (BNM) to hike rates by most 50bps at most this year to tame inflation and capital outflow pressure. We hold the view of one rate hike of 25bps in 2H22 to keep the interest rate differentials narrow.

KLSE – The FBM KLCI stayed relatively unchanged at 1,597 amidst positive performance in global and regional bourses. Detailed transactions showed

that local retailers were net buyers with RM36.4mil, offset by local institutions and foreign investors with net outflows of RM27.3mil and RM9.1mil, respectively.

Fixed income – Local benchmark yields saw mixed movements with the 3-year +3.0bps to 3.320%, 5-year -1.0bps to 3.595%, 7-year -3.5bps to 3.950%, and 10-year -5.5bps to 4.060%.

Rates – The IRS yield curve shifted lower with (3Y) -1.5bps to 3.280%, (5Y) - 4.5bps to 3.655%, (7Y) -3.0bps to 3.855%, and (10Y -4.5bps to 4.070%.

Against major currencies – The ringgit outperformed against EUR, GBP, JPY, AUD, CNY, and VND but weakened against SGD, THB, IDR and PHP.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.2200 and 4.2230 while our resistance is pinned at 4.2450 and 4.2480.

Source: AmInvest Research - 14 Apr 2022