Monday, October 9, 2017

FW: RHB FIC Rates & FX Market Weekly - 9/10/17

 

 

9 October 2017

 

 

Rates & FX Market Weekly

 

 

FOMC Minutes Unlikely to Unveil New Surprises

 

 

Highlights

 

Global Markets

¨    As markets remain fixated to Fedspeaks and tax reforms developments, temporarily boosting the USD, September FOMC minutes and retail sales/CPI/PPI will be scrutinized in the week ahead. We expect little surprises on the former while the devastating Atlantic hurricane season will probably largely impact economic prints. However hurricanes’ effects should be transitory, reflected into 3Q17 (cf. 2005 hurricane Katrina), and as such the dislocation between headline and core inflation likely to remain a hurdle for policymakers. With the probability of a (pre-emptive?) December hike climbing, the decision appears already priced in mitigating future volatility; we reiterate our cautious approach given the near-term uncertainties (debt ceiling agreement and consequences on policy funding, Puerto Rico’s risk of government shutdown, Fed’s chair transition…) underscoring our neutral USD and UST view.

¨    European policymakers will be under the spotlight: ECB’s President Mario Draghi and other board members will speak in the week ahead. As markets await ECB’s next announcement for the future of its QE/APP any shift in rhetoric could exacerbate volatility although unlikely in our view; the EURUSD is still holding above 1.1680 for now keeping the mildly bullish view alive although the current yet expected-to-be-transitory Dollar strength reduces the conviction of stronger rise in the short term.  In the UK, Brexit negotiators David Davis (UK) and Michel Barnier (EU) continue the discussions on the terms of departure with little details revealed at this juncture. Markets will take cues from global developments and industrial/manufacturing production data due; remain neutral GBP.

¨    In Japan, core machine orders, PPI and tertiary industry index are due this week. As geopolitical tensions eased in the region combined with a stronger USD, the USDJPY has held above 111.00, in the upper part of the multi-month 106.50/115.00 range, where we expect the pair to continue trade in the coming weeks. Last but not least, Australian assets are likely to take cues from Chinese economic numbers in the week ahead, while the domestic calendar appears relatively light with confidence and home loan data due. ACGB-UST yield spreads tightened marginally from recent highs, as RBA continued to play down any rate hikes over the near-term; target 10y ACGB-UST spreads to hit 40bps over the coming weeks.

 

AxJ Markets

¨    Expect an eventful week in China post-holidays with various key economic indicators due including Caixin services PMI, trade and possibly new loans data. Services PMI is expected to remain in expansionary territory, while trade growth should stay strong given continued pickup in external demand and robust regional trade outlook. PBoC Monday’s CNY fixing will also be closely scrutinised given the recent upward dollar momentum, which should offer early clues into regional sentiment during the Asian session; stay neutral CNY.

¨    Moving to Singapore, August retail sales due mid-week could offer insights into domestic consumption, with overall growth remaining lackluster compared to the past 2 years. Investors’ attention will subsequently move onto the 3Q17 GDP print and MAS MPS, with growth likely to remain supported via external demand, although we think MAS is unlikely to lift the rate of SGD NEER appreciation at this point. We also think the chance is low for MAS to signal a resumption of SGD appreciation at this stage, given looming uncertainties into 2018; we remain neutral towards the SGD. Elsewhere, expect a relatively quiet week in Thailand with only foreign reserves data due, where BoT is likely to catch a breather given the recent climb in USDTHB. Thai assets should take cues from USD and UST sentiment in the week ahead, and we still expect a marginally stronger THB over 4Q17 on average; stay neutral THB.

¨    In Malaysia, pace of Industrial Production growth in August should remain robust given strong manufacturing expansion and stabilising conditions in the mining sector. While USDMYR ticked past the 4.20 level on the stronger USD, we eye stability in the MYR given a robust economic outlook alongside a neutral BNM in November. With no economic data due in Indonesia, expect broad EM flows and global market sentiment to influence Indonesian asset movements in the week ahead.

  

Weekly Positioning

 

 

Rates

FX

Overweight

 

 

Mild Overweight

 

EUR

Neutral

UST, GILT, Core EGBs, ACGB, SGS, CGB, ThaiGB, MGS, IndoGB

USD, GBP, AUD, JPY, MYR, THB, SGD, IDR, CNY

Mild Underweight

KTB

KRW

Underweight

JGB

 

 

 

This message is intended only for the use of the person(s) to whom it is 
addressed and may contain information that is privileged or otherwise protected
from disclosure. If you are not the intended recipient you are hereby notified that
any use, review, disclosure or copying of this message and the information it
contains is prohibited. If you receive the message in error, please notify the
sender by reply e-mail and discard all its contents.
 
Thank You.

 

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Related Posts with Thumbnails