The US

The Dollar index fell 0.88% to 102.35 following the US Fed policy meeting. The central bank decided to raise its interest rate by 25 bps to 4.75% - 5.00%. The Fed also stressed on the recent banking sector turmoil and omitted “ongoing increase” in Fed Funds rate from the latest policy statement. But during postmeeting press statement by the Fed Chair Jerome Powell, he reiterated that the central bank is still committed to bring inflation down to 2.0% and will raise the rates higher if need be.

Looking at the dot plot projection, the median expectation of Fed Funds rate for 2023 is at 5.1%, the same median as December 2022’s projection. But the GDP projection was revised lower to 0.4% from 0.5% while Core PCE inflation revised higher to 3.6% from 3.5%.

US Equities & Sovereign Bonds

Wall Street closed lower as the Dow Jones fell 1.63% to 32,030, S&P500 tumbled 1.65% to 3,937, and tech-heavyweight Nasdaq fell 1.60% to 11,670.

The UST10Y benchmark yield lost 17 bps to 3.434% while UST2Y lost 23 bps to 3.937%, narrowing the inverted differentials to 50 bps.

Eurozone

The Euro rose 0.82% to 1.086, the highest level since early February 2023 as investors are betting for sooner fed funds rate peak. At the same time, the ECB President Christine Lagarde stated that the inflation rate in the region is “still high” and reassuring the public that the central bank remains committed in bringing back price stability and taming down the inflation rate back to 2.0% “over the medium-term” is non-negotiable. Her statements echoed that of another ECB member Joachim Nagel, saying that the fight against high inflation is not over.

The UK

The British pound also took advantage from the weaker Dollar as it gained 0.42% to 1.227. In parallel, inflation data in the UK showed that consumer price growth surprised on the upside. It unexpectedly grew by 10.4% y/y in February 2023, faster than 10.1% y/y in the previous months and compared to market forecast of 9.9% y/y. It was driven mainly by higher food and electricity prices. Excluding food, energy, alcohol and tobacco prices, core inflation rate rose to 6.2% y/y in February 2023, from 5.8% y/y in the prior month.

Japan

The Japanese Yen appreciated 0.81% to 131.44. The BoJ so far has received zero demand for US dollars among banks in Japan after the central bank made agreement with others in boosting Dollar liquidity through daily FX swap lines.

China

The Yuan weakened 0.03% to 6.881. The most indebted property developer Evergrande Group announced plans to restructure its US$22.7 billion in offshore debt, which could support investor sentiment on China’s property sector.

South Korea

The Korean Won strengthened 0.28% to 1,307. South Korea’s finance minister said that authorities will closely monitor the markets and take measures if needed following the US and Europe Banking sector turmoil.

Australia

The Aussie dollar rose 0.24% to 0.669. The leading economic index by Westpac-Melbourne Institute fell 0.06% m/m in February 2023 after a larger 0.12% m/m drop in the prior months, reflecting the lagged effects of interest rate hikes, higher inflation and falling house prices.

Crude Oil

Oil prices surged as market players are expecting that the US Fed will pause soon after the recent 25 bps hike. Brent surged 1.82% to US$76 per barrel while WTI rose 2.12% to US$70 per barrel.

Gold

Gold Climbed 1.55% to US$1,970/oz.

Malaysia Highlights

The Ringgit appreciated 0.33% to 4.456 and traded within 4.454 and 4.475. Focus will be on inflation data tomorrow where the market is expecting a lower annual inflation growth of around 3.6%.

Ringgit Outlook for the Week

The support level for USD/MYR is seen at 4.410 and 4.420 while resistance is pinned at 4.480 and 4.490.

FBM KLCI

The FBM KLCI rose 0.39% to 1,412. Detailed transactions showed that the local institutions were the net sellers with RM32.0 million flow, respectively, while being offset by the net buying flow from foreign investors and local retailers at RM18.5 million and RM13.6 million.

Fixed Income

MGS yield 7-year -2.0bps to 3.820%, while 10-year -2.0bps to 3.930%. The 3- year and 5-year yield was flat at 3.420% and 3.520%.

Source: AmInvest Research - 23 Mar 2023