• All eyes on FOMC’s minutes meeting amid mixed sentiment

Global Highlights

Dollar Index – The dollar edged lower by 0.04% to 106.50. Industrial production in the US increased by 0.6% m/m from the previous month, beating market forecasts of a 0.3% rise and moving up from stagnation in June. Focus now will be on the FOMC minutes that will be released later tonight to paint clearer picture on Fed’s future policy path.

US equities & sovereign bonds – Wall Street was mixed as the Dow Jones rose 0.71% to 34,152, S&P500 rose 0.19% to 4,305, while the Nasdaq fell 0.19% to 13,103. The UST10Y benchmark yield added 1.6bps to 2.804% while the UST2Y added 7.5bps to 3.257%, widening the inverted differential between the two to 45bps.

Euro – The euro inched higher by 0.11% to 1.017, retreating away from two weeks low. The Euro Area's trade balance fell by EUR 24.6 billion in June, the eighth consecutive month of a deficit. This is higher than market expectations of a EUR 20 billion deficit. Exports increased at a slower rate of 20.1% y/y to EUR 210 billion while imports increased by 43.5% y/y to EUR 276.8 billion.

British pound – The pound rose 0.34% to 1.210 following the release of UK’s labour market data. The most recent data indicated a cooling in the labour market, particularly as the number of vacant jobs decreased for the first time since August 2020 and earnings excluding bonuses decreased by 3% when adjusted for inflation, which was the largest decline since records began in 2001 and amid high inflation environment.

Japanese yen – The yen weakened 0.68% to 134.22 as the currency remained suppressed by the rising global interest rate and somewhat disappointing local economic data.

Chinese yuan – The yuan depreciated 0.22% to 6.788. China is increasing its investment in infrastructure projects to boost its struggling economy, which has been hampered by stringent COVID-19 regulations, a shaky real estate market, and low demand. According to figures released on Monday, infrastructure investment increased 7.4% in the first seven months of the year compared to the same period last year.

Korean won – The won depreciated as well by 0.17% to 1,308. Over the next five years, South Korea plans to build 2.7 million new homes across the country, many of them in major cities where a lack of housing has frequently been cited as a contributing factor to rapid price increases. The government would also give young people and those with lesser incomes financial, administrative, and tax benefits when they buy or rent homes.

Australian dollar – The Australian dollar eased slightly by 0.01% to 0.702. We can expect more interest rate hike to come by the Reserve Bank of Australia (RBA) according to the latest minute meeting. Although, it will be guided more by the incoming data and inflation situation rather than pre-set move.

Commodities Highlights

Crude oil – WTI crude tumbled 3.22% to $86 per barrel, while Brent crude futures sank 2.90% to $92 per barrel. The market waits for clarification on talks to revive an agreement that could allow for additional Iranian oil exports as prices reaching their lowest level since before Russia's invasion of Ukraine.

Gold – The price of gold fell 0.23% to US$1,775/oz as the sentiment surrounding the safe-haven US dollar remains largely supported as risk-off flows dominate amid recessionary fears heightened.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated by 0.20% to 4.467 and traded within the range of 4.4675 and 4.4595. According to the government, due to extremely strong demand from importing nations, the price of rubber is expected to exceed RM3.50/kg at the end of this year. To accommodate the demand for exports, the government is aiming to increase production of rubber, which is currently priced at above RM2.50/kg.

KLSE – The FBM KLCI rose 0.98% to 1,519. Detailed transactions showed that local institutions were net seller of RM193.1mil. Local retailers and foreign investors were buyers of RM29.2mil and RM163.9mil, respectively.

Fixed income – The local government benchmark yield remained largely unchanged as the 3-year -1.0bps to -3.467%, 5-year -1.0bps to 3.733%, while the 7-year and 10-year remained unchanged at 3.920% and 3.960%, respectively.

Rates – The IRS yield for the (3Y) -1.5bps to 3.450%, (5Y) -2.0bps to 3.575%, (7Y) -1.0bps to 3.680%, and (10Y) -4.0bps to 3.745%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.440 and 4.450 while our resistance is pinned at 4.500 and 4.510.

Source: AmInvest Research - 17 Aug 2022