• US economy grows faster than expected.

Global Highlights

Dollar Index – After two days of falling, the dollar index regained its footing and surged by 0.81% to 110.59 supported by the economic data. Report indicated the economy grew by 2.6% q/q, higher than the market forecast of 2.4%. And this is the first growth quarter following two quarters of contraction the first and second quarter of 2022.

Growth in 3Q22 was driven by the narrowing trade deficit, an upswing in consumer spending, non-residential investment, and government spending. However, the downside comes from the decline of residential fixed investment, marking the sixth quarterly decline, and private inventories.

But we think the growth momentum will potentially lose steam as higher borrowing and living cost will start to eat into household’s wallet. Businesses are also expected to feel the pinch. While we intend to maintain our projection of 2.3% y/y growth for 2022, we expect slower growth of 0.5% y/y in 2023.

US equities & sovereign bonds – Wall Street closed was in the mixed bag as earning reports shown mixed movements. The Dow Jones rose 0.61% to 32,033, while the S&P500 fell 0.61% to 3,807, and the Nasdaq dropped 1.63% to 10,793.

The UST10Y benchmark lost 8.4bps to 3.919% while the UST2Y fell 13.0bps to 4.274%, narrowing the differential between the two to 35.5bps.

Euro – The euro tumbled 1.16% to 0.996 despite hitting an intraday high of 1.0094 following the ECB’s decision. As expected, the central bank hiked its interest rates by 75bps, bringing the deposit facility interest rate to 1.5% and the main refinancing rate to 2.0%. We still expect another 75bps hike in December and followed by 50 bps in February and 25 bps in March. This would bring the deposit rate to 3.00%, reaching the terminal rate.

British pound – The British pound took a rally relief as it fell 0.52% to 1.157. On the data front, the CBI retail sales balance survey showed that the headline reading jumped to 18 in October, almost reversing the -20 balance in September. But retailers expect the sales volume would fall next month due to rising costs, high interest rates and labour shortages.

Japanese yen – The Japanese yen strengthened slightly by 0.05% to 14.29. All eyes will be on the BoJ meeting today where it is likely to be a non-event i.e., no changes on the accommodative monetary policy. But we may see a clearer guidance on yen intervention as the currency is being pressured by rate differentials with other currencies.

Chinese yuan – The yuan weakened sharply by 0.81% to 110.59 China’s FDI surpassed CNY 1 trillion (USD 138.52 billion) as at end September, an increase of 15.6% y/y.

On the pandemic front, more Chinese cities are ramping their Covid-19 curb efforts by locking down districts, and sealing up buildings, affecting millions of people across the cities. On Thursday, China reported a third straight day of more than 1,000 new Covid cases nationwide

Korean won – The won strengthened 0.55% to 1,418. The Korean economy slowed but remained stronger than anticipated in 3Q2022, driven by stronger exports despite lower private and government spending.

Preliminary data released by the Bank of Korea showed that the country's GDP increased by 0.3% q/q in July-September, following a 0.7% q/q increase in 2Q2022, the slowest rate in 2022 as individuals and companies reduced spending in reaction to rising prices and interest rates.

Australian dollar – The Australian dollar fell 0.69% to 0.645.

Commodities Highlights

Crude oil – Oil price closed higher due to supply concerns. Brent surged 1.33% to US$96 per barrel while WTI climbed 1.33% to US$89 per barrel.

Gold – Gold dipped 0.08% to US$1,663/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated slightly by 0.06% to 4.717 and traded within the range of 4.717 and 4.703. We expect the MYR to trade between our support level of 4.710 and 4.720 while our resistance is pinned at 4.725 and 4.735.

KLSE – The FBM KLCI eased 0.06% to 1,454. Detailed transactions showed that the foreign investors were the net buyers with RM124.9mil positions, offset by the local institutions and retailers with RM99.2 and RM25.8mil positions, respectively.

Fixed income – The local bond market saw better buying interests as the 3- year remained at 3.855%, 5-year -1.0bps to 4.210%, 7-year -9.0bps to 4.260%, and 10-year -6.0bps to 4.380%.

Rates – The IRS yield for the (3Y) -2.0bps to 4.010%, (5Y) -2.3bps to 4.198%, (7Y) -5.1bps to 4.319%, and (10Y) -4.0bps to 4.430%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.710 and 4.720 while our resistance is pinned at 4.725 and 4.735.

Source: AmInvest Research - 28 Oct 2022