• Hopes for end to Shanghai lockdown reignite risk-on mode

• MYR to fluctuate between 4.3850 and 4.4150 against USD

Global Highlights

Dollar Index – The dollar extended its falling trend for the fourth consecutive session as it fell 0.79% to 103.36 as market players returned to risk-on mode. On the data front, retail sales in the US grew 0.9% m/m in April 2022 after a 1.4% growth in March and line with the market forecast. This indicates that consumer spending remained robust despite the high inflation although this is the slowest retail sales growth in four months. On a side note, the US Fed chair Jerome Powell stated last night that he will back rises in the interest rate until consumer prices start normalizing towards a “healthy level”, signalling that the Fed’s plan to raise interest rate will not be deterred by the recent pullback in inflation reading. He also warned that the economy could be hurt by the attempt.

US equities & sovereign bonds – Wall Street turned green, rebounding from the previous losses as the Dow Jones rose 1.34% to 32,655, S&P 500 climbed 2.02% to 4,089 while the Nasdaq surged 2.76% to 11,985. The better performance was due to positive earnings results and economic data released throughout the day, providing something for market players to cheer about. The UST10Y benchmark added 10.4bps to 2.986%, while the UST2Y was at 2.700%, and bringing the differential yields to 28.5bps.

Euro – Along with the recovery of the risk-on sentiment, the euro added 1.11% to 1.055. The 2nd Est of Euro Area’s GDP growth rate for the first quarter of 2021 was revised higher to 5.1% y/y from the initial 5.0% and above 4.7% in the previous period as countries rebounded from Covid-19 infections last year. One of ECB’s officials, Francois VIlleroy, stated on Monday that policymakers will monitor the development in the foreign exchange market, indicating their unwillingness to let the currency becomes too weak.

British pound – The pound stretched its winning position as it climbed 1.41% to 1.249, the highest this week, benefitting from the recent upbeat labour market data. The unemployment rate in the UK fell to its lowest since 1974 at 3.7%, beating the market’s forecast of 3.8%. Also, average weekly earnings including bonuses expanded by 7.0% y/y, much higher than the market forecast of 5.4%. Adjusted for inflation, the regular pay declined by 1.2%, the sharpest fall since 2013, noting the high living costs in the UK.

Japanese yen – The yen weakened 0.17% to 129.38, retreating from the recent two-week high it touched last week. The Japan Tertiary Industry Index rose 1.3% m/m in March 2022, stronger than expectations of 1.1% m/m and the biggest increase in 5 months.

Chinese yuan – The yuan surged by 0.71% to 6.738 as it tried to recover losses made in the past one month. The risk-on mode in the global currency market was driven mainly by the easing of pandemic-related restrictions in Shanghai and a higher likelihood for it to end in the near future despite the sour economic data released this week. Authorities in Shanghai stated that they are targeting for the restrictions to end by 1 June 2022 over six weeks of lockdown.

Korean won – The won strengthened 0.72% to 1,274.90, taking cues from the more aggressive BoK comments recently.

Australian dollar – The Aussie dollar continued its bull run for the third session as it rose 0.83% to 0.703 after minutes of the Reserve Bank of Australia’s May meeting showed that the board is increasingly hawkish. The board considered a larger 40bps rate hike, before agreeing to a more modest 25bps rate increase and it is prepared to raise the cash rate by larger increments at upcoming meetings to tame inflation, if needed.

Commodities Highlights

Crude oil – Oil prices fell following the possibility that the US will ease some of the restrictions on Venezuela’s government, rekindling hopes for new oil supplies. Brent tumbled 2.02% to US$111 per barrel while WTI nose-dived 1.58% to US$112 per barrel.

Gold – The gold price fell further by 0.49% to 0.49% to US$1,815/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit appreciated slightly by 0.06% to 4.390 and traded within the range of 4.396 and 4.3865.

KLSE – The FBM KLCI edged up 0.27% to 1,549 amidst positive regional and major indices. Detailed transactions showed that local institutions were net buyers with RM57.7mil, offset by local retailers (RM5.7mil) and foreign investors’ (RM51.9mil) net selling flow.

Fixed Income – The MGS benchmark for the 5-year remained at 4.010%, while the 3-year was +0.5bps to 3.675%, 7-year +0.5bps to 4.435%, while the 10- year +2.0bps to 4.460%.

Rates – The IRS yield curve flattened with the (3Y) +6.5bps to 3.725%, (5Y) +2.5bps to 3.930%, (7Y) +1.0bps to 4.100%, while the (10Y) -4.5bps to 4.250%.

Against major currencies – The ringgit had the upper hand against the JPY, PHP and VND but fell against the EUR, GBP, CNY, AUD, SGD THB and IDR.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.3800 and 4.3850 while our resistance is pinned at 4.4150 and 4.4350

Source: AmInvest Research - 18 May 2022