Daily FX Update, 04 May 2016

v  Fed Lockhart says a rate hike at the next Fed meeting is “a real option” v  EU Commission cuts Eurozone inflation and growth forecast v  UK’s manufacturing PMI falls to the lowest level since February 2013 v  Malaysia’s manufacturing PMI falls to the lowest level in five months

OVERNIGHT MARKET UPDATE: ·         US – Atlanta Fed President Dennis Lockhart, non-voting member, said a rate hike at the next Fed meeting is “a real option”. Lockhart said the market seemed to be underestimating the odds of a rate increase in June. “I would put more probability on [June] being a real option,” he said. ·         Euro area – The EU Commission published its spring economic forecasts. They were broadly in line with the message published by the ECB in March and therefore provided few surprises for markets. HICP inflation was revised lower to 0.2% 2016 (0.5% in March) and 1.4% in 2017 (previously 1.5%), growth forecasts were nudged down to 1.6% this year, rising to 1.8% next year, and the unemployment rate is forecast to fall to 9.9% vs 10.2% this year. Easy monetary policy, low oil prices, a competitive exchange rate and slowly improving labour markets are supporting growth. ·         UK – The UK manufacturing PMI disappointed in April falling to 49.2 from a downwardly revised 50.7 in March. That was the lowest reading since February 2013. New orders fell back to 50.4 vs 51.9. ·         Currencies – There was a general risk-off tone to markets which helped the AUD continue to decline as markets read through the surprise RBA cut. GBP fell on the PMI weakness. ·         Equities – US stocks fell to their lowest level in three weeks as weaker-than-expected manufacturing data in China revived worries about global growth and sent investors scurrying out of the perceived risk of equities. ·         Rates – US Treasury 10-year benchmark yield dropped as a global equity selloff sparked concerns about global economic slowdown fuelled demand for haven assets.  ·         Energy – Crude oil prices dropped as renewed fears of a supply glut hit investor confidence ahead of weekly inventory data that are expected to show an increase in crude supplies. ·         Precious Metals – Gold prices finished lower after the USD rebounded off session lows and as investors sold some of their investments in the rapidly rising precious metal.

INDICATIVE MAJOR CURRENCIES Last Close 8.02 am Snapshot Expected Range for Today Bid Offer Low High USD/MYR 3.9315 3.9140 3.9640 3.9120 4.0000 JPY/MYR 3.6981 3.6920 3.7330 3.6600 3.7300 SGD/MYR 2.9116 2.9270 2.9590 2.8900 2.9400 EUR/MYR 4.5318 4.5320 4.5750 4.4800 4.5700 AUD/MYR 2.9474 2.9540 2.9880 2.9200 2.9900 GBP/MYR 5.7258 5.7340 5.7810 5.6700 5.7900 USD/JPY 106.31 106.41 106.82 106.01 107.01 EUR/USD 1.1527 1.1350 1.1660 1.1450 1.1560 AUD/USD 0.7497 0.7350 0.7660 0.7460 0.7560 Source: Bloomberg, AmBank