FW: RHB FIC Rates & FX Market Update - 16/11/17

 

 

16 November 2017

 

 

Rates & FX Market Update

 

 

Unemployment Rate Seen Steady in the UK and Australia

 

Highlights

 

¨   Global Markets: While the dollar was broadly unchanged, 10y UST yields fell c.5bps overnight after headline CPI fell to 2.0% y-o-y in October (Sep: 2.2%; consensus: 2.0%); retail sales came in firmer than expected (0.2% m-o-m; consensus: flat). With 10y now approaching the 2.30% level once again, having previously attempting to test the 2.50% level, buying pressure could ease over the next few trading sessions, with investors likely to eye the FOMC meeting minutes due in the week ahead; stay neutral USTs. Over in the UK, 3m employment change turned negative in September (-14k; consensus: +52k), although the unemployment rate remained steady at 4.3%. The GBP was surprisingly unchanged overnight, while Gilt yields dipped c.1-4bps, in line with rates movements seen in Bunds and USTs. BoE's Broadbent justified the recent November rate hike by UK's above-target inflation and dwindling spare capacity, while noting that the impact of Brexit remains a huge ambiguity at this stage; stay neutral GBP at current levels.

¨   AxJ Markets: Elsewhere, both Indonesian exports and imports picked up pace in October (exports: 18.4% y-o-y; imports: 23.3% y-o-y) on better non-O&G exports, despite weaknesses seen in North Asia markets. Overall 2017 exports are expected to grow at a robust pace given low-base effect on a weak 2016 backdrop and improving commodity outlook. Indonesian watchers will now turn their attention to the BI monetary decision due later today, where we expect no change in headline rates, with a moderate possibility of an easing in macro-prudential measures; stay neutral IDR.

¨   The AUDUSD pair fell 0.55% overnight below the 0.76 handle after consumer confidence (-1.7% m-o-m) and 3Q17 wage data (2.0% y-o-y; consensus: 2.2%) disappointed, spurring concerns over an uneven economic momentum. The pair clawed back some losses this morning after unemployment rate unexpectedly dipped to 5.4% (consensus: 5.5%), although employment gains were below consensus at only +3.7k (consensus: 18.8k). We continue to remain neutral towards the AUD over the medium term, with RBA likely to delay normalising monetary policies beyond 1Q18, in our view.

 

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