The US

The greenback bounced off from its two-week lows and closed the week at 103.56, 0.21% higher on daily changes ahead of the FOMC meeting this week where consensus is expecting a hold in the policy rate. In addition, on the macro front, the market is expecting US May inflation to ease further to 4.1% y/y compared with previous reading of 4.9% y/y.

US equities & sovereign bonds

Wall Street was traded stronger as investors were mostly expecting a Fed pause this week, but expectations for another 25-bps increase in July remain in place. The Dow Jones was up by 0.13% to 33,877, S&P500 increased by 0.11% to 4,299, and Nasdaq up by 0.16% to 13,259.

At market close, 2- and 10-year US Treasuries settled the week at 4.596% and 3.739%, respectively, widening the inverted differential between the two to 85 bps.

Euro Area

The Euro fell 0.31% to 1.075 despite the expectation of a rate hike during the ECB meeting this week. The currency is being pressured by the grim economic outlook as data showed the region has officially entered recession.

The UK

The British Pound was up 0.10% to 1.257. The British Chambers of Commerce noted that the UK economy will narrowly avert recession in 2023 as the organization revised its GDP growth to +0.3% from -0.3% amidst lingering high inflation.

Japan

The Japanese Yen weakened 0.35% to 139.40. The Bank of Japan is due to meet this week and is expected to keep its interest rate unchanged. Nevertheless, market players are on the lookout for hints of potential policy changes.

China

The Yuan depreciated as well by 0.26% to 7.131. Inflation data showed that consumer price in China grew by only 0.2% y/y during May 2023, little changed from 0.1% in the previous month, a signal of weak economic recovery post-Covid rules.

Also, a set of China economic data will be released this week including retail sales, unemployment rate, and loans growth which could provide clearer picture on the economy’s recovery progress.

South Korea 

The Won strengthened 0.96% to its more than 2-month high at 1,292. South Korea central bank cautioned that early changes on monetary policy stance could worsen the currency which is currently at weaker position compared to pre-pandemic level of below 1,200.

Australia

The Aussie rose 0.39% to 0.674, continued benefitting from RBA’s surprise rate hike move and hawkish tone.

Crude oil

Investors remained concerned on global economic growth despite Saudi Arabia’s pledge to cut oil supplies and causing oil prices to trade lower. Brent fell 1.54% to USD74.8 per barrel while WTI shed 1.57% to USD70.2 per barrel.

Gold

Gold eased 0.22% to USD1,961/oz as dollar and UST yields ticked higher.

Malaysia Highlights

The Ringgit posted rangebound movement on Friday, retracing early day mild strength after the release of higher-than-expected US jobless claims. However, sustained USD strength late on Friday meant USD/MYR remained elevated above 4.610. By the end of the session, Ringgit closed stronger by 0.16% to 4.614.

On the data front, Malaysia’s industrial production (IP) for April 2023 contracted by 3.3% y/y (March 2023: 3.2%). Moving forward, we are expecting slower production activity for the remainder of the year, given the pessimistic global economic outlook.

Ringgit outlook for the week

The support level for USD/MYR is seen at 4.590 and 4.600 while resistance is pinned at 4.620 and 4.650.

FBM KLCI

The FBM KLCI rose 0.10% to 1,376. Detailed transactions showed that foreign investors and local retailers were the net sellers of RM86.7 million and RM13.3 million flow, respectively, while being offset by the net buying flow from local institutions with RM100.0 million flow.

Source: AmInvest Research - 12 Jun 2023