Snapshot Summary…

Global FX: Modest gains for the dollar after solid retail sales data

Global Rates: UST yield maintained its downward trajectory

MYR Bonds: Global sentiment contributed to local govvies space gains

USD/MYR: Ringgit could get a boost from trade data and 2Q2024 advance estimate GDP data this week

Macro News

United States: US retail sales recorded a 0% m/m change in June 2024, better than market expectations of a 0.3% decline. The drop in receipts at auto dealerships drives this. However, retail sales ex-autos rose 0.4% m/m.

Eurozone: The ZEW Indicator of Economic Sentiment for the Euro Area dropped by 7.6 points to 43.7 in July 2024, significantly falling from the three-year high recorded in the prior month. This decline aligns with concerns that the Eurozone's economic growth may struggle to gain momentum following its slowdown in 2022 and 2023.

Fixed Income

Global bonds: UST yields kept up more momentum downward on rate cut bets by the Fed. On Tuesday, traders took a cue from Fed Governor Adriana Kugler, who said recent data suggests inflation is expected to decline to the Fed's 2% target. On the other hand, resisting further dip in yields was US advance retail sales in June at 0% m/m against consensus expectations of a slip of 0.3%, while the prior month's number was revised up to +0.3% m/m from +0.1% prior estimate. Also, rising confidence in a Trump election win caused traders to worry that inflation may be boosted next year. German yields also fell on rate cut hopes at the Fed.

MYR Government Bonds: There were continued gains in the ringgit government space yesterday. The lack of major negative drivers aided sentiment, especially as global sentiment remained driven by Fed interest rate cut hopes. Benchmark yields were down 1-2 bps yesterday.

MYR Corporate Bonds: Yesterday, there was mixed showing in the ringgit corporate bonds space as investors may have taken a cautious stance after recent gains. Higher- grade AAA names led to the net buying interest we noted yesterday. Of these, we saw Air Selangor 10/42 dipped 1 bps to 4.20% and Johor Corp 06/27 down 1 bps to close at 3.93%.

Forex

United States: Based on strong retail sales data, the dollar index rebounded by 0.1% to 104.27. The dollar also received a boost from increased optimism regarding Donald Trump's potential victory in the upcoming presidential election.

Europe: The EUR changed a little overnight, partially guided by the USD movement. The release of better-than-expected US retail sales data kept a lid on the EUR. Meanwhile, the ZEW Eurozone economic expectations index went down to 43.7 readings in July, which also pressured the EUR. Traders await the Eurozone CPI for June, where the consensus expectation is for a flat 2.5% y/y, similar to the pace in May. UK CPI for June is also awaited today, with the expectation for a smaller 0.1% m/m rise versus +0.3% m/m prior month.

Asia-Pacific: Asia: JPY and CNY were kept at bay yesterday, and some support for the DXY was seen above the 104.2 level. On the flip side, supporting JPY from further dip was confidence in the market that BoJ may not be done by lending support to the currency. BoJ's balance sheet signalled that the central bank may have spent USD 13.5 billion last Friday to prop up the JPY. Meanwhile, the CNY remained pressured on Tuesday after the prior day saw the release of weaker-than-expected economic data, including 2Q2024 GDP and June retail sales.

Malaysia: The ringgit against the dollar level fell amid the USD finding support above 104.2, while nervousness for a firmer USD going into next year due to rising expectations of a Trump win also held the ringgit back yesterday. Malaysia will release trade data and the advance estimate 2Q2024 GDP data this week. The consensus expectation is at +4.6% y/y after the 4.2% growth in the previous quarter, but we believe it may come in higher than 5.0% amid better export print. Exports are expected to rise 4.6% y/y in June versus +7.3% the month before. Better-than-expected numbers should lend support for short-term ringgit movement.

Other Markets

Gold: Gold kept rallying amid the increased prospects of a Fed rate cut, possibly by September. The metal was sustained higher even as US retail sales data was flat in June versus the expectation of more contraction while the USD found support.

Crude oil: Crude oil price fell by >1.0% overnight in both Brent and WTI on wariness over the medium-term demand outlook emanating from the weak China GDP print this week. The demand risks overshadowed US crude oil inventories, down by 4.4 million barrels last week, as per data from the American Petroleum Institute.

Source: AmInvest Research - 17 Jul 2024