• The greenback shines while the euro and pound tumble

Global Highlights

Dollar Index – The dollar rose 0.55% to 104.51 as sentiment surrounding the US economy partly recovered following the New York’s Fed President remarks. He cited that recession is not his “base case” and we will see slower growth instead. He also mentioned that the current rate is still far from where it needs to be in taming down the inflation and need to reach 3.00% - 3.50% by the end of this year. On the data front, the CB consumer confidence index tumbled more than expected as its headline figure fell to 98.7, down from 103.2 in the previous months and well below expectation of 100.0.

US equities & sovereign bonds – Wall Street turned into sea of red as the Dow Jones sank 1.56% to 30,947, the S&P500 dropped 2.01% to 3,822 and the Nasdaq tumbled 2.98% to 11,182. The UST10Y benchmark yield fell 2.8bps to 3.172% while the UST2Y lost 1.2bps to 3.110%, making the yield differential between 10/2 narrowed to 6.2bps.

Euro – The euro fell 0.61% to 1.052. It failed to hold its ground following ECB’s President remarks of the rate hike cycle path. While a 25bps hike is expected in July, the option of larger hike in September can take place if the medium term inflation expectation continues to worsen. Meanwhile, the GfK Consumer indicator in Germany fell to a new record low of -27.4 for July 2022 from -26.2 in June (cons.: -27.7).

British pound – The pound dropped 0.66% to 1.218. On the pandemic front, the Covid-19 cases picked up with the number of new daily infections climbed to 47k recently from 5.4k during early June. This is ahead of various summer sporting and a large-scale musical event, which could drive new cases further up. The mandatory restrictions will not be reimplemented unless the public health situation becomes unmanageable according to health experts.

Japanese yen – The yen weakened further by 0.50% to 136.14 and marked the third consecutive sessions of losing streak as it hits its weakest level in 24- years. On another note, for the third day in a row, businesses in Japan struggled to reduce their use of electricity as the government issues warnings about potential shortages due to the high demand for electricity amid severe hot weather. Japan’s power supply has been constricted since an earthquake in its north-eastern region forced nuclear power plants to halt operations.

Chinese yuan – The yuan was subdued as it weakened 0.24% to 6.708. Chinese Premier reaffirmed the country’s direction on easing policy to drive the revive the pandemic-ravaged economy. He noted that while China’s economy has improved, but its foundation remained shaky. Also, authorities also decided to ease some quarantine rules for international arrivals, a sign of its first step towards easing pandemic border restrictions.

Korean won – The won appreciated 0.21% to 1,283. South Korean PM calls for measures to stabilise inflation as inflation rate jumped to 5.4% y/y in May, which is the fastest rate in almost 14-years and likely to worsen with hikes of electricity rates in July.

Australian dollar – The Aussie dollar fell 0.26% to 0.691. Amidst political spat between with China, Chinese investment into Australia fell to US$585mil, down from a peak of US$16.2 billion in 2008.

Commodities Highlights

Crude oil – Supply concerns in the global oil market remain as major oil producers Saudi Arabia can only produce more by 150k bpd while the UAE is already at its maximum capacity. Brent surged 2.51% to US$118 per barrel while WTI soared 2.00% to US$111 per barrel.

Gold – The gold price declined 0.16% to US$1,820/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit appreciated by 0.18% to 4.397 and traded within the range of 4.404 and 4.396. PPI experiencing growth of 11.2% y/y in May due to higher commodity prices. Total subsidies hit nearly RM80 bn in efforts to combat rising cost of living.

KLSE – The local bourse’s FBM KLCI gained 1.16% to 1,455 and top gainers were seen in energy, plantation, and consumer products & services. Detailed transactions showed that the local institutions were the net sellers with RM29.6mil position, while being offset by the net buying flow of RM12.4mil (local retailers), and RM17.2mil (foreign investors).

Rates – The IRS yield for (3Y) +2.0bps to 3.680%, (5Y) +3.0bps to 3.880%, (7Y) -0.5bps to 3.965%, and (10Y) +7.0bps to at 4.080%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.3880 and 4.3920 while our resistance is pinned at 4.4150 and 4.4200.

Source: AmInvest Research - 29 Jun 2022