Snapshot Summary…

Global FX: The dollar rose overnight to follow the uptick in UST yields

Global Rates: UST saw more net selling following the weekly jobless claims report, which showed no change from the prior week's level

MYR Bonds: The MGS market strengthened yesterday on the back of the prior day's UST rally

USD/MYR: The pair firmed, but cautious sentiment may ensue today after the dollar strengthened overnight

Macro News

Australia: Australia reported that employment fell by 6.6K in March (consensus +7.2K), whilst full-time employment increased by 27.9K (February: 79.4K). Also, in March, Australia's unemployment rate rose to 3.9% from 3.7% in February (consensus 3.9%), and the March participation rate fell to 66.6% from 66.7%.

United States: The US reported a negative number for housing, where existing home sales fell 4.3% m/m in March to a seasonally adjusted annual rate of 4.19 million (consensus 4.20 million) compared with 4.38 million recorded in February. Sales fell at the start of the spring selling season amid high prices, mortgage rates, and low inventory.

Malaysia: Malaysia’s Economy Minister said that Malaysia will go ahead and reduce petrol subsidies later this year to reduce its fiscal deficit to reach the target of 4.3% by phasing out blanket subsidies for RON95 fuel, which holds the lion's share of the MYR81 billion overall subsidies spent in 2023. At the same time, he said that the current model has allowed the T20 households to become 53% of the recipients.

Fixed Income

Global bonds: UST saw more net selling following the weekly jobless claims report, which showed no change from the prior week's level, as well as a better-than-expected Philadelphia Fed index for April (actual 15.5; consensus 0.0). More losses followed, with hawkish Fedspeak from New York Fed President (FOMC voter) Williams, who said there is no urgency to cut rates at this time and that a rate hike would be considered if data warrant it. Atlanta Fed President (FOMC voter) Bostic said the path to 2.0% inflation will be slower than expected.

MYR Government Bonds: The MGS market strengthened yesterday after the prior UST rally. However, overnight, the UST market recorded more losses, especially following some hawkish comments from a couple of FOMC voters; thereby, we think there is a risk of losses in the MGS market today.

MYR Corporate Bonds: Following the overnight UST rally, more net buying activity was seen on the ringgit corporate bond market. Various AAA and AA names saw firmer levels. The more heavily traded papers include 12/28 PONSB (AA2), which fell 4 bps to 4.10%, and 09/33 Danga at 4.10% (-3 bps).

Forex

United States: The dollar rebounded stronger overnight, and the DXY index rose above 106. Hawkish comments from some FOMC voters added to dollar strength and firm economic data, including no increase in weekly unemployment claims.

Europe: The EUR fell against the firm USD overnight. However, we think movement today for the EUR should be on the downside, seeing the strong USD again moving to above the 106 level, especially because of hawkish comments from FOMC officials while recent comments from ECB officials were mixed to dovish on rates.

Asia-Pacific: Generally, steady movements were seen in Asian currencies yesterday. However, like DM currencies, we think the downside risk to EM Asia is possible today after the overnight USD rally. Yesterday, we saw CNY was stable amid reports of yuan buying by state-owned banks. There is also pressure on the AUD, especially after this week's data showed employment fell by 6.6K in March, whereas expectations were for a rise of about 7.7 K.

Malaysia: Yesterday, the ringgit appreciated despite the strength of the US dollar possibly due to its cheap valuation. The 10-day Relative Strength Index (RSI) showed that the USD/MYR pair had crossed the overbought threshold after recently touching the 4.80 level. However, upside risks are on for today after the overnight USD rally.

Other Markets

Gold: Gold prices rose 0.8% to USD2,379/oz as traders looked past the hawkish Fedspeak and stronger US labour market data. The precious metal remains attractive as a safe-haven asset amidst geopolitical risks and demand from central banks.

Crude oil: Oil prices closed mixed as Brent shed 0.2% while WTI was stable at USD82 per barrel as players weighed stronger dollar vs. escalating geopolitical tensions in the Middle East.

Source: AmInvest Research - 19 Apr 2024