Tuesday, October 24, 2017

FW: RHB FIC Rates & FX Market Update - 24/10/17



24 October 2017



Rates & FX Market Update



Weak EUR Sentiment Persists on Spanish Woes




¨   Global Markets: US Treasuries and US Dollar registered modest gains (-1.2/-1.8bps; +0.25% respectively) with market participants awaiting Donald Trump's decision on the next Federal Reserve Chairperson and the upcoming ECB meeting. On the former, the decision is expected to come before Trump's upcoming trip to Asia (November 3rd). Additionally, the Chair is not the only board position to be filled as a new Vice Chair is also needed following Stanley Fisher's resignation. This should avoid knee-jerk market reactions as it could be a balancing force since the FOMC remains a committee working through consensus; remain neutral USD and UST.

¨   AxJ Markets: Over in Singapore, September headline inflation climbed 0.4% y-o-y, in line with consensus expectations and August print; core CPI edged higher to 1.5% y-o-y (consensus and August: 1.4%); gains in food and healthcare prices offset the decline in COE prices. MAS now expects 2018 core inflation to average 1-2%, while the authority expects housing prices to be less of a drag to headline inflation next year. We see only a modest possibility of a tightening in SGD NEER policy in MAS's April review at this juncture, and retain our neutral stance towards the island state's currency.

¨   Elsewhere, the Japanese Yen pared earlier losses (USDJPY: -0.36%) as markets digested the results of Japan's election while the Euro remained on a weak footing on continued political tensions in Spain and ahead of ECB's meeting (EURUSD: -0.18%). For now, the USD is still at resistances against the two currencies, 115 and 1.1680 respectively, and we maintain our views as long as those levels hold: remain neutral JPY with opportunities to be sought with the range and mildly bullish EUR.


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