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

 

 

17 November 2017

 

 

Rates & FX Market Update

 

 

US House Passed Tax Reforms, Awaiting Senate Affirmation

 

Highlights

 

¨   Global Markets: In the US, the House Republicans succeeded in passing their version of the tax reform. It failed to lift up the US Dollar (+0.10%) as the legislation still faces an uphill battle in the Senate debating its own plan with uncertainties on the numbers of votes given the one-party approach on the reform and the thin Republican majority, before a needed reconciliation between the two chambers. We remain neutral USD and UST as risks and uncertainties linger on (i) the tax overhaul and (ii) the future of Fed's policies as the economic-recovery-less-inflation environment persists.

¨   AxJ Markets: Over in Singapore, October NODX printed strongly at 20.9% y-o-y (consensus: 11.9%) after a weak September print, and despite weaknesses seen in North Asian export data; USDSGD fell c.0.2% post-data. Trade strength appeared to be driven by volatile petrochemicals and pharmaceutical exports, although consistent trade robustness over the coming months may instil greater confidence in Singapore's 2018 outlook; stay neutral SGD at this juncture. Elsewhere, Bank Indonesia kept its key policy rate unchanged at 4.25%, sending the IDR marginally stronger this morning as fears of another rate cut recedes. The Bank reiterated that 3Q17 GDP growth remains on track, although full-year loan growth appears likely to fall short of initial expectations, at 8% y-o-y. BI will keep the counter-cyclical capital buffer unchanged at 0%, while improvements in monetary policy transmission will help support credit expansion in 2018, despite lingering worries over NPLs; stay neutral IDR.

¨   The EURUSD traded sideways yesterday, consolidating after staging a c.2% rally in the first part of the week. Inflation prints for the Eurozone came in as expected (October final CPI: 1.1% YoY). Looking forward, we are constructive on the EURUSD since the pair broke above 1.1700. A retest of August's highs in the 1.20 area is likely in the medium term with a first target and resistance zone to reach and clear at 1.1870/1.1900 in the short term.

 

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