Snapshot Summary

Global FX: The dollar tumbled 1.2% as focus shifted to Trump's early days in the office

Global Rates: UST curve bull flattened amid lessened worries over inflation

MYR Bonds: Local govvies was supported by delayed Trump's tariff implementation

USD/MYR: The ringgit hit three weeks highs on improving risk sentiment

Macro News

Germany: The ZEW Indicator of Economic Sentiment for Germany dropped to 10.3 in January 2025, down from 15.7 in December, significantly missing the expected 15.3. This decline comes as the German economy contracted for a second consecutive year in 2024, with rising inflationary pressures. Additionally, political uncertainty is increasing due to a potentially challenging coalition-building process in Germany and the unpredictability of economic policies under the new Trump administration.

UK: UK's labour market weakened as unemployment rate rose to 4.4% in the three months through November 2024 slightly above market expectations and the previous rate of 4.3% recorded in the two previous periods.

Fixed Income

Global Bonds: The US Treasuries market showed strength as Trump takes over the White House and news reports suggesting that he will take time before implementing his promised tariffs. The UST curve bull flattened amid lessened worries over inflation and Fed expected to continue cutting rates this year though not at this month's FOMC meeting.

MYR Government Bonds: The local government bond market was stronger yesterday seeing there was support from news that Trump was not looking to implement his tariffs immediately. Details for auction of the new 3Y GII (GII 07/28) was announced at large MYR5.5 billion amount. WI was last taken at 3.545%, which is 0.5 bps higher than what was done on previous day.

MYR Corporate Bonds: There was support for MYR corporate bonds as well where we noted interest on various AA names. Nevertheless, we also noted some selling pressure on select names as well. Notable trades include AA1 rated Johor Plant 09/34 which fell 1 bps to 4.00% and AAA rated PASB 02/28 which rose 6 bps to 3.84%.

Forex

US: The DXY Index tumbled 1.2% on Tuesday, as all eyes were focusing on Trump early days in the White House. The President Trump's decision to not imposing fresh tariffs on Asian and European imports as soon as he takes over the office sent the dollar lower, which was in contrast compared with market expectations of blitz executive orders implementation and reduced inflation pressures concerns, and the accompanying likelihood of additional Fed rate cuts. In general, there were improvements in risk sentiment following Trump's move. But cautious remained as news flows showed he is considering 25% tariff on Canada and Mexico as early as 1st February.

Europe: The euro retained its ground around the 1.04 level as the greenback softened, though a subdued reading in Germany's Economic Sentiment has put downward pressure. While EUR/USD took a breather thanks to President Trump's focus on immigration rather than trade during his inaugural day. However, broader upside potential remains constrained by lingering trade-barrier risks. Meanwhile, sterling climbed 0.2% in response to a mixed bag of UK labor market data.

Asia Pacific: The JPY firmed, taking advantage from the speculation that the BoJ will move towards rate hike during policy meeting later this week, according to sources from Kyodo news. The Chinese yuan rose by 0.1% and now trading circa 7.266, its highest level since mid-last month. Commodity-linked AUD/USD also was on the upside on Tuesday after Trump refrained to be too hawkish on trade.

Malaysia: The ringgit hits three weeks high as risk sentiment improved and amidst firmer Asian currencies. This is also ahead of BNM's MPC meeting due later today and markets continue to pencil in 3.00% OPR expectations this time around. While the central bank's decision would not largely dictate MYR's movements amidst President Trump taking office, BNM standing firm on OPR could spell gains for ringgit as the Fed is still expected to ease, narrowing the rate differentials between the two.

Other Markets

Gold: Gold advanced by 1.4% to USD2,745/oz as the greenback weakened in response to President Trump postponing his promised tariffs on Canada and Mexico until February. Meanwhile, Treasury yields drifted lower and further buoyed precious metals.

Oil: WTI and Brent slipped after President Trump declared a national energy emergency and postponed the imposition of a 25% tariff on Canadian imports until 1st February 2025, even as he rolled out orders to bolster US oil production.

Source: AmInvest Research - 22 Jan 2025