• Dollar trades marginally higher before US inflation data tonight

Global Highlights

Dollar Index – The dollar dipped 0.06% to 106.37 ahead of US inflation data. According to market expectations, inflation will slow to 8.7% y/y from 9.1%. Additionally, core CPI is anticipated to advance to 6.1% y/y from 5.9% because of underlying inflation's more moderate 0.5% monthly increase (down from 0.7% in June). We expect inflation to recede to 8.5% in July primarily due to the lower gasoline price which declined by 7.5% to US$4.56 per gallon for the same month.

US equities & sovereign bonds – Wall Street traded lower with Dow Jones falling 0.18% to 32,774, S&P500 dropping 0.42% to 4,122, and Nasdaq declining 1.19% to 12,494. The UST10Y rose 2.0bps to 2.777% while the UST2Y climbed 6.4bps to 3.270%, widening the inverted differential between the two to 49bps.

Euro – The euro appreciated 0.16% to 1.021, hovering near parity. At a time when the continent is already dealing with rising food and fuel costs, as well as a potential energy shortage this winter, a severe drought is escalating the dangers to the continent's economy, affecting crop harvests, energy output, and trade flows. The European Commission projected in July that nearly half of the European Union was experiencing "warning" levels of drought.

British pound – The pound edged lower by 0.02% to 1.208. The BoE plans to sell off government bonds it purchased during more than a decade of quantitative easing to curb inflation, with £10 billion per quarter in parallel with rising its key interest rates.

Japanese yen – The yen weakened 0.07% to 135.05. Bank of Japan officials recently stated that the institution needed an exit plan for its expansive stimulus programme while still maintaining that for the time being as easy monetary conditions were required as wages needed to catch up in order to increase consumption and support Japan's economic recovery.

Chinese yuan – The yuan weakened slightly by 0.02% to 6.753. Since mid-July, China's 10-year government bond yield has been below 2.8% due to worries about the country's economic outlook, Covid curbs, an ongoing real estate crisis, and divergent monetary policy between the PBoC and the Fed.

Korean won – The won added 0.15% to 1,304. Amidst heightened volatility in the global energy market, South Korea is looking to accumulate more liquified natural gas stockpiles before winter and targeting to lift inventories to about 90% full by November 2022.

Australian dollar – The Australian dollar fell 0.31% to 0.697. The Business Confidence Index of National Australia Bank Ltd increased by 5 points to +7 in July as sales and earnings surprisingly held up despite rising interest rates and high inflation. However, businesses also reported record expenses due to supply shortages. On the other side of the equation, Australia’s consumer sentiment continued to fall for nine months in a row due to elevated inflation and interest rates, posting a drop of 3.0% m/m in August 2022, to 81.2.

Commodities Highlights

Crude oil – WTI crude fell 0.29% to US$90 per barrel, while Brent crude futures lost 0.35% to $96 per barrel. Oil prices initially rose due to oil flows halting on the Druzbha oil pipeline to parts of central Europe. However, prices turned softer as details of the disruption were made clear and flows were expected to resume within days.

Gold – The price of gold rose to US$1,794/oz bolstered by demand for safe haven due to ongoing fears about the global economic and geopolitical tensions.

Malaysia Highlights

Malaysian ringgit – The ringgit strengthened 0.08% to 4.455. The Industrial Production Index (IPI) grew by 12.1% y/y in June 2022, the highest increase since May 2021, above the market forecast of 4.9%, driven by growth across manufacturing, electricity and mining.

KLSE – The FBM KLCI gained 0.11% to 1,498. Detailed transactions showed that both local retailers and foreign investors were net buyers with RM13.9mil and RM15.8mil positions respectively, offset by the net selling flow of RM29.7mil by local institutions.

Rates – The IRS yield for (3Y) was -2.0bps to 3.475%, (5Y) -1.5bps to 3.625%, (7Y) -3.0bps to 3.710%, and (10Y) -3.5bps to at 3.815%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.490 and 4.450 while our resistance is pinned at 4.500 and 4.510.

Source: AmInvest Research - 10 Aug 2022