Snapshot Summary…

Global FX: Dollar demand continue to dwindle as market focused on rate cut outlook

Global Rates: UST gained after key speech and slightly weaker data

MYR Bonds: The MGS/GII market saw some support though cautious mode ensued ahead of key US labour market data and Powell speech

USD/MYR: Ringgit firmed amidst weaker dollar demand

Macro News

United States: In January 2024, there was a notable decline in the number of job vacancies to 8.86 million, reaching the lowest point observed over the past three months and falling short of market expectations of 8.9 million. Additionally, the United States observed a decrease in the number of job quits to 3.385 million, marking the lowest level since January 2021, and indicating a downward trend from the previous month (3.439 million).

Euro Area: In January 2024, retail sales in the Euro Area experienced a modest increase of 0.1% on a m/m basis, aligning with market projections and following a revised decrease of 0.6% m/m in the prior month. The month saw a notable rise in the sales of food, drinks, and tobacco which reversing the declines over the previous three months. Additionally, sales in the automotive fuel sector also expanded during the same month. Annually, retail sales declined by 1.0%, continuing a trend of contraction for the 16th consecutive month.

Australia: 4Q2023 GDP expanded a modest 0.2% q/q, as expected (previous 0.3%), and up 1.5% y/y (expected 1.4%; previous 2.1%). There were signals that Australia’s economy grew modestly as consumers drew down savings to keep up spending levels.

Fixed Income

Global bonds: U.S. Treasury yields experienced a slight decline on Wednesday, influenced by Federal Reserve Chair Jerome Powell's testimony before Congress, coupled with concerns triggered by the substantial drop in New York Community Bancorp's share prices which raised questions about the stability of regional banks. In his prepared speech delivered during his mandated appearance in front of Congress on Wednesday morning, Chair Powell projected that the Federal Reserve is likely to reduce interest rates in 2024 though he emphasized the importance of not hurrying this action until there is a firm belief that inflation is consistently heading towards the Fed's 2% goal.

MYR Government Bonds: The MGS market saw cautious net buying activity across the curve as players are suspected to still be actively hunting for yield pick-up. Meanwhile, the firm US ISM Services PMI the day before which did not push the 10Y UST above 4.20 while the market was waiting for Powell’s testimony, ensured the cautious gains in MGS.

MYR Corporate Bonds: Trading volume in the PDS market was lighter at MYR749 million with continued interests were seen on higher grade papers (GG,AAA). Amongnotable trades were MYR80 million on 08/36 Prasarana done at 3.97%, MYR30 million on 11/27 Petroleum Sarawak (AAA) done at 3.77%, and MYR130 million on 10/33 Public Bank done at 3.94%.

Forex

United States: The dollar fell and the DXY touched its lowest level in one month. The index fell alongside lower bond yields after hearing Powell’s comments suggesting an interest rate cut would be appropriate later this year. The dip in DXY also came after the weak AFP and JOLTS jobs numbers.

Europe: EURUSD rose as the USD retreated further and after release of better-than- expected Germany’s January exports and imports rose more than expected. However, there was some pressure on the EUR after the Eurozone January retail sales rose +0.1% m/m, which was weaker than expectations of +0.2% m/m. GBP consolidated its gains following UK Finance Minister Jeremy Hunt's plan for tax cuts in his upcoming spring budget.

Asia-Pacific: CNY was supported amid the weaker USD. The Chinese currency was also aided as the PBOC set the midpoint rate at 7.1016 per dollar, which was the firmest since 2 February as well as 923 pips firmer than Reuters' estimate of 7.1939. Elsewhere, the AUD rose. Australia's 4Q2023 GDP grew a modest 0.2% q/q, as expected (previous 0.3%), and +1.5% y/y (expected 1.4%; previous 2.1%) while January Retail Sales rose 1.1% m/m, as expected (previous -2.1%).

Malaysia: MYR was supported amid a weak USD, but was in a cautious trading mood similar to other currency markets in the region ahead of Powell’ testimony to Congress and more policy cues from the annual Chinese parliamentary session.

Other Markets

Gold: Prices rallied further to hover above the USD2,100 per oz mark. There was support after Fed's Powell reiterated that there will likely be a rate cut later this year.

Crude oil: Crude oil rallied by >1% movement. The EIA reported that crude oil inventories rose by 1.37 million barrels but diesel and gasoline fell to their lowest in two years.

Source: AmInvest Research - 7 Mar 2024