Daily FX Update, 26 May 2016

v  US Markit Serices PMI drops in May; optimism at the worst level since October 2009 v  US trade deficit in goods widens as imports recover v  US housing price index rises 1.3% in 1Q2016, the 19th successive quarterly gain v  German IFO index for May is the highest for this year v  Najib: FPC to form Fiscal Risk Technical Committee

OVERNIGHT MARKET UPDATE: ·         US – Flash Markit Services PMI index showed that the US services sector deteriorated in May, by falling to 51.2 from the April level of 52.8. Business optimism in the services industry dropped to the worst levels since Markit began recording it in October 2009. As a result of this, the Markit Composite PMI moved lower to near stall speed in May to 50.8 from 52.4 in April. ·         US – The trade deficit in goods, where services are excluded, rose to US$57.5 billion in April from a final reading of US$57.1 billion in March. Exports of goods were up by 1.8% from March’s reading while imports of goods rose by some 2.3% in April. ·         US – The US Federal Housing Finance Agency (FHFA) house prices index rose 0.7% for March from an upwardly-revised 0.5% the previous month. For the first quarter, prices rose 1.3%, the 19th successive quarterly gain. ·         Euro area – German’s May IFO reading was the highest this year, rising to 107.7 (from 106.7) and was led principally by a rise in expectations (101.6 from 100.5). Current conditions also improved slightly to 114.2. The data mirror the German PMI survey earlier in the week, which suggests the business outlook in Germany is improving. ·         Currencies – GBP rallied as markets further priced out Brexit. CAD reacted positively to the BoC remaining on hold. EUR strengthened against the USD on the back of positive IFO reading from Germany and market players are looking ahead to remarks from Fed Chairwoman Yellen this coming Friday. ·         Equities – US stocks closed higher, with the S&P500 posting its highest close in nearly a month as a jump in oil prices helped to fuel the rally in energy and materials shares.  ·         Rates – US Treasury yields were little changed as investors took a pause after a big selloff during the previous session. ·         Energy – Crude oil prices up (WTI +1.9%, Brent +2.3%) as the EIA reported that US crude supplies fell 4.2 million barrels to 53.71 barrels for the week ended May 20. ·         Precious Metals – Gold prices continued to record losses as near-term sentiment for precious metals remained gloomy despite the dollar inched lower.

INDICATIVE MAJOR CURRENCIES Last Close 8.02 am Snapshot Expected Range for Today Bid Offer Low High USD/MYR 4.1035 4.0740 4.1070 4.0720 4.1170 JPY/MYR 3.7233 3.6990 3.7330 3.6900 3.7600 SGD/MYR 2.9751 2.9510 2.9850 2.9500 3.0100 EUR/MYR 4.5791 4.5460 4.5800 4.5200 4.6200 AUD/MYR 2.9504 2.9230 2.9590 2.9100 2.9800 GBP/MYR 6.0268 5.9930 6.0340 5.9700 6.0800 USD/JPY 110.21 109.87 110.28 109.47 110.47 EUR/USD 1.1159 1.1000 1.1310 1.1100 1.1210 AUD/USD 0.7190 0.7030 0.7340 0.7140 0.7240 Source: Bloomberg, AmBank