Snapshot Summary…

Global FX: The dollar continues to be supported above the 105-level on hawkish Fed official comments

Global Rates: The UST market posted gains but yield movements were limited amid a lack of fresh US data

MYR Bonds: The ringgit government bond market was flat post-rally from the previous day

USD/MYR: The MYR posted marginal gains amid mixed to lower Asian currencies

Macro News

Australia: The Reserve Bank of Australia (RBA) maintained its monetary policy at a 12-year high of 4.35% for the fourth straight meeting. At the same time, the central bank noted that there are challenges in getting the inflation down to its target but tapered down expectations that there is a need to tighten the policy again. The less hawkish sentiment fell short of market expectations after the upside surprises seen in 1Q2024 Australia inflation. The central also expects inflation to be on track to reach the 2-3% target by the end of 2025. On another note, Australia’s retail sales dropped 0.4% m/m during March 2024, the final figure showed, down from 0.2% m/m growth in the prior month.Eurozone: The region’s retail sales surged 0.8% m/m during March 2024, erasing a 0.3% m/m decline in the previous month and marking the fastest monthly growth since September 2022. The market was expecting a slower 0.6% m/m growth. This can act as good news for its economic recovery after months of struggling with elevated cost pressures and tight borrowing costs.

Fixed Income

Global bonds: There was continued net buying activity in the US government bond market but yield movement was limited amid a lack of fresh US data and more UST supply this week. The USD58 billion 3Y note auction received firm demand amid the firm secondary market. The bid-to-cover ratio was 2.63x compared with the average of 2.86x in the past 12 auctions of the same tenor.

MYR Government Bonds: The ringgit government bond market was flat post-rally from the previous day as the market continued to digest the recent data releases from the US while waiting for the MPC meeting on Thursday. Meanwhile, the MYR 5Y IRS softened by circa 1 bps as traders continued to re-price the Fed rate cut expectation to be earlier than previously anticipated. Meanwhile, the market is expected to stay sideways due to a lack of economic releases this week.

MYR Corporate Bonds: The onshore corporate bond market saw only a slight bias towards net buying activity yesterday. The continued lag in the corporate bond market from the recent rally in the MGS market could be explained partly by some cautious sentiment before this week’s MPC meeting thus we are keenly awaiting the event toshow better performance in the PDS space. In any case, yesterday’s flows were led by GG papers 03/42 Prasarana at 4.16% and 11/42 Danainfra at 4.15%.

Forex

United States: The USD remained supported above the 105 DXY level. Despite signs from recent Powell comments post FOMC and drivers from the jobs data, FX markets are watching Fed official's comments this week for further hints to the rate policy direction. Overnight saw USD support from comments by Minneapolis Fed’s Kashkari who said the Fed will keep interest rates at the current level "for an extended period."

Europe: The EUR was pressured by the higher USD, but support came from a cautious tone by ECB Governing Council member Joachim Nagel, saying factors including geopolitical and decarbonisation could keep inflation pressure elevated for the years ahead. The GBP also fell ahead of the BoE meeting this Thursday.

Asia-Pacific: Asian currencies were mostly mixed down against the stronger USD. The yuan retreated 0.1% after larger gains in the previous session. Former deputy governor PBoC said that China is adopting a “looser monetary policy” but not necessarily through cutting interesting rates and at the same time, impacting the exchange rate. In Japan, the yen also was on the downside, falling 0.5% to finish at 154.69 as the market continued to favour other currencies against the yen on negative interest rate differentials. The AUD fell 0.4% on the day as the RBA’s monetary policy was kept unchanged and its tone was less hawkish than expected.

Malaysia: The MYR closed marginally firmer at 4.7387 after it opened at 4.742 amidst mixed to lower Asian currencies. This translates into better performance on MYR cross currencies.

Other Markets

Gold: Gold edged lower to USD2,314/oz as supports remained from the signals of an expected Fed rate cut somewhere in 2H2024.

Crude oil: Oil prices finished relatively unchanged as Brent closed at USD83 per barrel while WTI closed at USD78 per barrel as geopolitical tension in the Middle East remained elevated.

Source: AmInvest Research - 8 May 2024