• ECB monetary policy meeting to conclude later today

Global Highlights

Dollar Index – The dollar gained 0.37% to 107.076 after a 7-day downward trend. US mortgage applications fell 19% y/y to the lowest since 2000 showing signs of lower housing demand. The US president is considering removing import duties on US$370 billion worth of Chinese goods in light of US firms paying over US$32 billion in tariffs during the trade war.

US equities & sovereign bonds – Wall Street gained where Dow Jones rose 0.15% to 31,875, S&P 500 gained 0.59% to 3,960 and the tech heavyweight Nasdaq surged 1.58% to 11,898. The UST10Y benchmark yield continued to climb to 3.537%, while the UST2Y was at 3.227%, where the differential between these securities were –20.07bps.

Euro – The euro was 0.46% weaker at 1.018 due to the stronger dollar. On the monetary policy, the odds for the ECB to hike the interest rates by 50bps increased substantially as the meeting is scheduled later today.

British pound – The pound lost 0.18% to 1.197 as the dollar strengthened. June’s annual CPI increased to 9.4% from May's 9.1%, the highest level since February 1982. The primary drivers of inflation last month were an increase in food costs of almost 10% and a 42% increase in petrol prices. This signalled that the BOE will continue hiking interest rates to cool price pressure.

Japanese yen – The yen weakened 0.01% to 138.210. The BoJ will announce its monetary policy today, which would likely result in unchanged interest rates. However, its inflation forecasts are expected to be higher.

Chinese yuan – The yuan down 0.17% to 6.756. China has reiterated its stance on maintaining targeted macro policies instead of a large-scale stimulus to hit its growth goal of 5.5% this year. The government has also signalled that it will make some changes on the zero-Covid policy, in response to the disappointing second quarter economic growth number.

Korean won – The won appreciated 0.06% to 1,312.73. General Motors Co's South Korea unit suspended production of all vehicles at its two factories since last week after the local supplier ERAE AMS, which demanded a price hike for its products, refused to supply parts.

Australian dollar – The Aussie dollar lost 0.13% to 0.689. To reduce inflation, which has reached a 20-year high of 5.1%, the RBA governor suggested raising the interest rate from its present level of 1.35% to a neutral 2.5%. The RBA has increased rates for three consecutive months, and markets are anticipating more increases to close to 3.5% by the end of the year.

Commodities Highlights

Crude oil – Oil prices were down where Brent declined 0.40% to US$106.92 per barrel and WTI slipped 1.88% to US$102.26 per barrel, suggesting some price volatility in response to Russia’s warning that the supplies sent via the biggest pipeline to Europe could see more reductions or possibly a suspension. The European Union executive proposed a voluntary objective for member states to cut gas use by 15% until March.

Gold – The gold price declined 0.88% to US$1,697/oz, as a stronger dollar offset the limited support for bullion due to expectations of the US Federal Reserve deciding against raising interest rates by 75 basis points next week.

Malaysia Highlights

Malaysian ringgit – The ringgit was on the downside as it lost 0.06% to 4.452 due to a stronger dollar. Regarding the austerity measures, the finance minister said that the ministry is estimating savings of between RM5 and RM6 billion from the remaining operating allocation in 2022 is expected, hinting at a temporary postponement of projects.

KLSE – The FBM KLCI was up by 0.58% to 1,437. Detailed transactions showed that local institutions were net buyers of RM5.6mil, and local retailers were net sellers of RM5.6mil.

Fixed Income – The MGS 3Y was up 2.0bps to 3.550%, 5Y up 3.0bps to 3.760%, 7Y up 1.0bps to 4.010% and the 10Y remained at 4.060%.

Rates – The IRS yield for the (3Y) was +3.5bps to 3.495%, (5Y) +2.0bps to 3.625%, (7Y) +1.5bps to 3.725%, and (10Y) +3.0bps to at 3.800%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.450 and 4.470 while our resistance is pinned at 4.560 and 4.610.

Source: AmInvest Research - 21 Jul 2022