• Euro economy grew faster than expected in first quarter

Global Highlights

Dollar Index – The dollar climbed 0.22% to 102.54. Former Fed chair and current Treasury Secretary Janet Yellen said that inflation in the US is likely to stay high. She also added that fighting inflation should be top priority for the Fed and Congress at the moment. The dollar is expected to remain firm around the current level, as the market is waiting for the latest inflation number to be published this Friday.

US equities and sovereign bonds – Wall Street lost its ground as the Dow Jones fell 0.81% to 32,911, S&P 500 dropped 1.08% to 4,116, and Nasdaq shed 0.73% to 12,086. The yield differential between the UST10 and MGS10 was around 134.6bps Also, the yield differential between the UST10 and UST2 fell to 24.8bps where the UST10 was at 3.022% and the UST2 at 2.774%.

Euro – Despite the stronger dollar, the euro added 0.12% to 1.072. On the macro front, the Eurozone economy grew at a faster pace by 0.6% q/q, higher than what was initially expected despite the Omicron outbreak and the invasion of Ukraine. The outlook for the remainder of the year is on the downside as the war in Ukraine continues and inflation has not receded.

British pound – The pound lost 0.12% to 1.254. The OECD forecasted that the economic growth in the UK will be on the downside next year due to the effects from high inflation and rising lending rate that are worsening the cost of living, plus the effects from Brexit.

Japanese yen – The yen further weakened as it depreciated 1.25% to 134.25 as the economy contracted by 0.1% q/q. less than initially estimated in the first quarter of the year since consumer spending held up better than expected. On the monetary policy front, the Bank of Japan governor stood by his decision that the monetary policy will remain accommodative to support the economy.

Chinese yuan – The yuan sank 0.20% to 6.684. The World Bank has revised down its growth forecast China by 0.8 percentage points to 4.3%. The main reason for the downgrade was disruptions from the zero-Covid policy.

Korean won – The won appreciated 0.33% to 1,253.63. South Korea's economy grew by 3.0% y/y, slower than earlier predicted in the first quarter of this year as investment and spending weakened due to Covid-19 and supply chain issues.

Australian dollar – The Aussie slid 0.53% to 0.719. The aggressive tightening by the Reserve Bank of Australia (RBA) is expected to affect first-time homebuyers the most. Due to the pressure from inflation, consensus are expecting that the RBA will continue to tighten its monetary policy in the months to come.

Commodities Highlights

Crude oil – Brent surged 2.50% at US$123 per barrel, while WTI soared 2.26% to US$122 per barrel.

Gold – The gold price declined 0.05% to US$1,853/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit was unchanged at 4.395. Bank Negara Malaysia (BNM) deputy governor Datuk Abdul Rasheed Ghaffour said that the adjustment of the market to the rate hike would rely on economic growth. On the fiscal policy, Finance Ministry deputy secretary general of treasury Datuk Johan Mahmood Merican said that there will be no new taxes, including the reintroduction of the goods and services tax (GST) until the economy fully recovers.

KLSE – The FBM KLCI closed lower by 0.14% to 1,524. Detailed transaction showed that local institutions were net buyers by RM36.4mil. Local retails and foreign investors were net sellers of RM3.4mil and RM33.0mil respectively.

Rates – The IRS yield for (3Y) +0.50bps to 3.660%, (5Y) -2.0bps to 3.875%, (7Y) +0.2bps to 4.020%, and (10Y) -0.5bps to at 4.150%

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

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 4.4100 and 4.4200.

Source: AmInvest Research - 9 Jun 2022