FW: RHB FIC Rates & FX Market Weekly - 2/10/17

 

To: undisclosed-recipients:
Subject: RHB FIC Rates & FX Market Weekly - 2/10/17

 

2 October 2017

 

 

Rates & FX Market Weekly

 

 

Closely-Watched NFP Print Potentially Distorted by Hurricanes

 

 

Highlights

 

Global Markets

¨   In the week ahead, the US reports September ISM manufacturing and jobs data with NFP print likely to have softened as two major hurricanes probably disrupted hirings. On the policy front, among other Fedspeaks, the rhetoric of Fed's Chair Janet Yellen will be scrutinized at Saint Louis' Fed conference as the FOMC still appears on track to raise interest rates in December despite inflation being below its target illustrated by last week's softer than expected inflation numbers. We remain neutral on USD and UST as too many uncertainties plagued the US outlook in the near term horizon.

¨   In Europe, the unemployment rate is likely to have continued its decline translating the improving labour market while producer prices are anticipated to have increased in August. The ECB will publish the accounts of its September meeting which should have limited impact as markets await the ECB's announcement regarding the extension of the QE potentially perceived as a tapering on reduced APP purchases. While the Euro registered a decline last week, it held above our 1.1680 support supporting our mildly bullish view. In the UK, PM Theresa May speaks at the Conservatives Party's annual conference where Brexit related issues are expected to be addressed which could weigh on the GBP sentiment. We continue to expect the GBPUSD pair to stabilize as and remain neutral GBP.

¨   Japanese Tankan surveys for 3Q17 are expected to print steadily underscoring the ongoing positive economic recovery in Japan. Despite so, the Japanese Yen should continue to take cues from global developments in particular the escalation/de-escalation of the North Korean conflict; remain neutral JPY. Over in Australia, market participants will be looking out for any shifts in policy rhetoric from the RBA, given the improved economic outlook and the bank's acknowledgement of higher Australian rates over the medium term. Trade data and Retail Sales will also be closely tracked by markets, with any disappointment likely to weigh on the AUD; we remain neutral towards the Australian currency for now.

 

AxJ Markets

¨   After the stellar PMI readings over the weekend, the Chinese calendar is expected to be quiet amid the week-long holidays. Expect attention to quickly shift towards the CPC meeting beginning mid-October; we remain neutral CGB duration.

¨   Over in Singapore, the economic calendar appears relatively light as well with only PMI prints and foreign exchange due, ahead of the mid-month MAS policy decision. Expect the SGD to take cues from global markets in the week ahead, although there could be some volatility amid investors' re-positioning ahead of the semi-annual statement; stay neutral SGD. Elsewhere, Thai inflation prints for September is likely to stay subdued, although unlikely to sway the BoT at this juncture given the strong growth momentum and brightening economic outlook. Given the massive foreign reserves already, the weekly print is unlikely to significant move Thai assets; stay neutral THB.

¨   Moving on to Malaysia, economic watchers will likely eye the Nikkei manufacturing PMI print to see if the expansion in the sector persists into September, although it is an unlikely key MYR mover under most circumstances. Another double-digit y-o-y expansion in trade data due at the end of the week will likely support growth expectations for 3Q17; stay neutral MYR. Lastly on Indonesia, September inflation prints are likely to test the 3% lower bound of BI's target range, potentially offering BI another strong reason towards another 25bps rate cut if 3Q17 growth disappoints. Foreign reserves data due at the end of week may shed some light on capital flows over the month of September; stay neutral IndoGBs for now.

  

Weekly Positioning

 

	Rates	FX
Overweight
Mild Overweight		EUR
Neutral	UST, GILT, Core EGBs, ACGB, SGS, CGB, MGS, IndoGB	USD, GBP, AUD, JPY, MYR, THB, SGD, IDR, CNY
Mild Underweight	KTB, ThaiGB	KRW
Underweight	JGB

 

 

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