Fundamental Overview

• Despite the ringgit's failure to strengthen below the 4.70/USD level, further signs of weakness in the US economy, such as the weaker- than-expected US retail sales reading of 0.1% MoM (consensus: 0.3%), have helped the ringgit remain stable below 4.71/USD. Americans are beginning to cut back on spending as the prolonged high-interest-rate policy takes its toll, indicating a potential broader softening in US growth momentum heading into 2H24. Mixed China economic activity and the PBoC's status quo have not provided support for the ringgit. Additionally, concerns over the French election have weakened the EUR, contributing to a stronger DXY.

• A dovish pause by the Bank of England yesterday has pressured the GBP and pushed the DXY higher, resulting in the ringgit weakening back above the 4.71/USD level. Despite recent evidence of weakness in the US economy, Fed speakers continue to emphasise the need for more data before considering easing, which may keep markets cautious and the DXY elevated above 105.0 in the coming week. Expected stable domestic inflation, projected at 1.9% YoY, may help keep the ringgit stable. The focus will be on the US housing market, consumer spending and core PCE reading next week, where further cooling could solidify expectations for a rate cut as early as September, bolstering the local note.

Technical Analysis

• The USDMYR’s neutral outlook is expected to persist for the week ahead, with the pair likely to trade near its 5-day EMA of 4.713.

• The pair may hover in a range of (S2) 4.700 – (R2) 4729 next week. However, weak US data may drive the pair to trade below 4.700.

Source: Kenanga Research - 21 Jun 2024