• Fed’s Beige Book suggests that US economy is still growing steadily but no sign of inflation receding

Global Highlights

Dollar Index – The dollar posted a 0.19% increase to trade around 100.58. According to the latest Fed’s Beige Book, the US economy is still growing steadily throughout April due to higher consumer spending that picked up during the month. Inflation, however, was showing zero sign of receding, where businesses are now forced to pay higher wages due to a tight labour market and further supply bottlenecks due to the situation in Ukraine that pushed commodity prices higher. Several FOMC members, including Jerome Powell and Mary Daly, backed the idea of a 50bps rate increase, while James Bullard was more hawkish, calling for a 75bps hike in the upcoming meeting.

US equities and sovereign – Wall Street closed lower with the Dow Jones losing 1.05% to 34,793, the S&P 500 down 1.48% to 4,394 and the Nasdaq sliding 2.07% to 13,175. The yield differential between the UST10 and MGS10 was around 125bps where the latter was at 4.158%. Also, the yield differential between the UST10 and UST2 has narrowed to 22.73bps where the UST2 was at 2.682%

Euro – The euro declined 0.18% to 1.083. On the macro front, the inflation rate in the Euro Area was revised slightly lower to 7.4% in March 2022, 0.1 percentage point lower relative to the previous reading. Nonetheless, the recent number is still the highest inflation rate on record due to surging energy prices. European Central Bank vice president Luis de Guindos backed ending bond purchases and raising the interest rate in July this year.

British pound – The pound dipped 0.29% to 1.303. The Bank of England’s Catherine Mann said that she would consider hiking the interest rate more than 25bps in the coming months to cool price pressure. She also said that the UK could already be in a stagflation due to rising energy prices and slowing retail sales although the current situation did not echo what happened in the 1970s and the 1980s.

Japanese yen – The yen weakened 0.41% to at 128.38. Japan’s ruling coalition is set to agree on a supplementary economic relief package to keep household and small business cope with surging prices. This was a response to higher energy prices recently and the depreciation of the yen that will boost import prices further.

Chinese yuan – The yuan slid 0.49% to 6.451. The IMF recently downgraded China’s GDP growth forecast to 4.4% due to the recent large-scale lockdown and said that a prolonged economic slowdown in China will have a significant effect on global growth.

Korean won – The won shed 0.19% to 1,238.36. On the macro front, the Producer Price Index in South Korea continued to increase for the third month by 8.8% y/y in March 2022, faster than February’s 8.5%. Reasons for the rise include higher oil prices and other commodities that pushed up the costs of producing goods. Recently, consumer inflation also jumped to 4.1%, the fastest in 10 years, and the latest PPI numbers could suggest that consumer inflation will stay relatively higher in the months to come.

Australian dollar – The Aussie dollar weakened 1.02% to 0.737. According to a recent survey, small and medium businesses in Australia were pessimistic on the current outlook due to surging prices in recent months.

Commodities Highlights

Crude oil – Brent jumped 1.43% to US$108.33 per barrel and WTI also rose by 1.01% to US$103.79 per barrel.

Gold – The gold price declined 0.3% to US$1,952/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated 0.19% to 4.289. The inflation rate for March 2022 will be published later today, where consensus is expecting inflation to be at 2.3%, slightly higher than the previous month’s 2.2%.

KLSE – The FBM KLCI gained 0.29% to 1,598. Trading activities on Thursday saw net selling from local institutions and local retailers at RM47.5mil and RM2.0mil respectively. Foreign investors were net buyer at RM49.5mil.

Rates – The IRS yield for the (3Y) was up 1.0bps to 3.320%, (5Y) +1.5bps to 3.705%, (7Y) +0.5bps to 3.890%, and (10Y) +1.0bps to 4.120%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.2800 and 4.2810 while our resistance is pinned at 4.3100 and 4.3200

Source: AmInvest Research - 22 Apr 2022