• US home sales dragged by high interest rates; dollar continues to gain.

Global Highlights

Dollar Index – The dollar gained 0.85% to 107.484, continuing its upward trend for the past seven trading days. The seasonally adjusted annual rate of existing house sales in the US fell 5.9% to 4.81 million in July 2022, the lowest since May 2020 and under the market's forecast of 4.89 million. Sales decreased for six months running as a result of the early June 6% mortgage rate peak.

US equities & sovereign bonds – Wall Street rose after losing in the previous day, where Dow Jones was up 0.06% to 33,999, S&P 500 added 0.23% to 4,284 and the tech heavyweight Nasdaq climbed 0.21% to 12,965. The UST10Y benchmark yield was at 2.882%, while the UST2Y was at 3.197%, bringing the differential between them to -31.52bps.

Euro – The euro lost 0.91% to 1.009 after gaining in the previous day. The loss was due to the new record annual inflation rate of 8.9% in July, up from 8.6% in June and 2.2% a year earlier. Energy prices jumped 4.02 percentage points while food, drink, and tobacco prices increased by 2.08 percentage points.

British pound – The pound continued its downward trend, dipping 0.98% to close at 1.193 due to pessimism in the economic outlook for the remainder of the year. Spending on credit and debit cards was at 97% of its level in February 2020, just before the Covid-19 pandemic, and was down seven percentage points in the week ending 11 August compared to the previous week. As inflation continues to race into double digits and affects consumer spending power, Britain's economy is anticipated to plunge into recession later this year.

Japanese yen – The yen also continued its downtrend, shedding 0.62% to 135.890 due to the stronger dollar. Inflation data is set to be announced today as analysts forecast that Japan's core annual inflation rate will rise from 2.2% in June to 2.4% in July, further exceeding the Bank of Japan's target of 2.0%.

Chinese yuan – The yuan lost 0.08% to 6.786 due to the bleak outlook on China’s economy. The sudden spike in Covid-19 cases has forced some consensus to revise down China’s economic projection.

Korean won – The won weakened 0.76% to 1,320.36. South Korea's fiscal deficit climbed by 22.2 trillion won ($16.9 billion) in 1H2022 y/y due to higher spending intended to support disadvantaged individuals and businesses afflicted by the pandemic.

Australian dollar – The Aussie dollar was down by 0.25% to 0.692. Seasonally adjusted unemployment in Australia reached a new record low of 3.4% in July, down from June's 3.5% and below market expectations of 3.5%, as the economy continued to recover from the pandemic. This suggests some demand pressure as the labour market improved.

Commodities Highlights

Crude oil – Oil prices continued to rebound due to concerns on supply constraint coming from the US. Brent gained 3.14% to US$96.59 per barrel, and WTI added 2.71% to US$90.50/barrel.

Gold – Gold lost 0.18% to US$1,759/oz, in line with the stronger dollar as the market continued to expect the Fed to aggressively tighten monetary policy after the Fed’s minutes publication two days ago.

Malaysia Highlights

Malaysian ringgit – The ringgit dipped 0.14% to 4.474 due to the stronger dollar. July’s trade numbers will be announced later today, where consensus is expecting exports to expand by 36.5%, and imports to grow by 40.4%.

KLSE – The FBM KLCI was down 0.10% to 1,517. Detailed transactions showed that local institutions and local retailers were net seller of RM80.1mil and RM52.5mil respectively. Foreign investors were buyers of RM132.6mil.

Rates – The IRS yield for the (3Y) was down 1.50bps to 3.475%, (5Y) +1.00bps to 3.615%, (7Y) up +3.00 to 3.750%, and (10Y) +5.50bps to 3.880%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.465 and 4.475 while our resistance is pinned at 4.570 and 4.630.

Source: AmInvest Research - 19 Aug 2022