HLBB Daily - ECB lowers growth and inflation outlook, today's FX reserves and export date key watch

Key Takeaways

Ø ECB came out with no surprises by keeping interest rate at record low and lowered growth projections for real GDP and inflation, respectively due to prevailing uncertainties coming from emerging markets and prolong subdued oil prices. The central bank went a dovish step further by stating that it is prepared to adjust its bond purchasing programme in terms of “size, composition and duration” if necessary. On the data front, the US and the UK came out mostly softer while the Eurozone and Japan surprised on the upside.

Ø USD rose against 6 G10s while the Dollar Index shot through to 96.40, boosted by refuge demand away from European majors amid ECB President’s dovish remarks. We expect the Dollar Index to be rangy with small gains going into US trade where it would be tested by a string of US data. Meanwhile, MYR weakened 0.9% to 4.2485 against USD and fell against all G10s. Expect MYR to remain weak, likely pressured by sell-off ahead of the weekend and US nonfarm payrolls tonight.

Ø MYR govvies ended mixed yesterday, with bargain hunting interest skewing towards the 5-year and 10-year benchmark MGS space. Total volume traded was over RM2.4b, with combined amount of RM1.1b traded worth for both MGS 10/20 and MGS 9/25. Levels ended 1 bps lower from previous close. Ringgit remains soft following some pared level in oil price.  Expect all eyes to focus on today’s release of export data and fx reserves. Declining trend for fx reserves may again trigger concerns, hence potentially dampening outlook on Ringgit performance.