Snapshot Summary

Global FX: Weak US data pressured the dollar downward

Global Rates: UST yields continued to fall, though the pace of decline was modest

MYR Bonds: Sentiment was aided by UST yields this week declining by >10 bps

USD/MYR: The ringgit erased part of the prior day's gains, but last night's softer US data could open the path for a ringgit bullish path today

Macro News

South Korea: The Bank of Korea (BoK) kept its key interest rate unchanged at 3% during its January 2025 meeting, defying market expectations of a 25 bps cut. This decision was made amid a depreciating won, affected by the dollar's strength and political instability in the country, which drove the currency to its lowest level in 15 years.

UK: UK GDP grew by 0.1% m/m, rebounding from a 0.1% contraction in October and September. However, it still fell short of the anticipated 0.2% increase.

US: US retail sales rose by 0.4% m/m in December 2024, marking the smallest increase in four months. This was lower than the upwardly revised 0.8% gain in November and below the anticipated 0.6% rise.

US initial jobless claims in the US increased by 14k in the week ending 11 January from the previous week to 217k, exceeding market expectations of 210k. This marked a sharp rebound from the upwardly revised 11-month low in the first week of January.

Fixed Income

Global Bonds: UST yields continued to fall, though the pace of decline was modest. Bonds picked up after the release of weak data, including US retail sales up by less than expected in December and the latest weekly initial jobless claims up by more than expected. Federal Reserve Governor Christopher Waller's statement that there's a possibility of three or four rate cuts this year aided bonds as well.

MYR Government Bonds: The MGS market ended mixed. Sentiment was aided by UST yields declining by >10 bps this week after recently hovering highs near 4.80%. However, the MGS market ultimately ended mixed as sentiment was cautious ahead of Trump's inauguration.

MYR Corporate Bonds: The ringgit corporate bond market ended firm, aided by last week's modest MGS gains. We noted gains along AAA and AA curves. Flows were led by papers such as AA2-rated PONSB Capital, which fell 1 bps to 3.96% on MYR50 million volume, and AAA-rated SEB 07/33, which closed unchanged at 3.05%.

Forex

US: The dollar slipped on Thursday as last night's data-showing a modest 0.4% climb in retail sales (consensus 0.6% m/m) and a larger-than-anticipated uptick in jobless claims-pointed to softer U.S. economic momentum. The dollar was also pressured by Fed Governor Waller's dovish remarks, saying that if inflation moves lower, there may be more rate cuts down the path, with 3 or 4 cuts possible.

Europe: The EUR posted marginal gains as the dollar was subdued. The euro found some support from the latest ECB monetary policy accounts for the latest December meeting, which sounded cautious. The ECB's December meeting highlighted a unanimous 25bps rate cut, prioritising gradual adjustments amid softening inflation and growth while dismissing a steeper 50bps move due to structural limitations. Meanwhile, the GBP also gained slightly, capped by underwhelming November's GDP data, which grew slower than the market expected.

Asia Pacific: The JPY soared to nearly a one-month high amid rising bets on a BoJ rate hike. This followed hawkish signals from Governor Kazuo Ueda and Deputy Governor Ryozo Himino about next week's policy meeting. With annual wholesale inflation hovering at 3.8%, it pressures the BoJ to raise interest rates. The yuan hovered near a 16-month low on Thursday, with market players eyeing a possible PBOC RRR cut before the Spring Festival to ease seasonal liquidity pressures. Despite the currency trading at around 7.332 -close to its daily downside limit- the central bank signalled firm support by setting a much stronger-than-expected midpoint fix at 7.1881, well above consensus forecasts.

Malaysia: The ringgit erased part of the previous day's gains, but last night's softer US data could open the path for a bullish ringgit today. Domestically, the focus will be on the advance estimates 4Q2024 GDP due today-our in-house call for 4.4% growth in 4Q2024 and 4.9% for the full year.

Other Markets

Gold: Gold rallied to its highest in a month as weaker-than-expected US retail sales fuelled talk of an accelerated Fed rate-cut schedule, pressuring the greenback and Treasury yields.

Oil: Crude oil returned to its five-month highs when the proposed truce between Israel and Hamas cooled Middle East tensions. Yet, market players remain on edge amid fresh US sanctions targeting Russia's oil shipments and historically tight American inventories, which could keep a floor under crude for the near term.

Source: AmInvest Research - 17 Jan 2025