FW: RHB FIC Rates & FX Market Update - 16/1/18

 

 

 

16 January 2018

 

 

Rates & FX Market Update

 

 

Looming Risks of US Government Shutdown Weighed on the USD

 

 

 

Highlights

 

¨   Global Markets: A thinner holiday trading, as the US were closed in observance of Martin Luther King Day, did not prevent the US Dollar from extending its drop against G10 and Asian currencies. Growing risk of a US Government shutdown at week's end weighed on the greenback. Recent controversial comments from President Trump somewhat damaged the prospects to reach a bipartisan deal on the debt ceiling agreement which has to be settled before Friday. The DXY closed -0.58% lower d-o-d at levels not seen since early 2015; remain mildly bearish USD.

¨   AxJ Markets: In Indonesia, December trade data surprised as the balance of trade registered a deficit with exports expanding at a much slower pace over the month than expected (6.93% vs. 13.85% and 13.46% in a the previous month). The Indonesian Rupiah remained on a strong footing now trading below the 13,400 handle, the middle of a multi-month range as improving risk sentiment amid carry trades continue to fuel foreign inflows; remain neutral IDR at this juncture and ahead of BI's policy meeting concluding on Thursday when we expect the central bank to remain on hold.

¨   While the USD weakens, the broad EUR has kept on appreciating against major and Asian currencies. On Monday, the EURUSD was just shy of the 1.23 figure, closing 0.57% higher at 1.2265. Euro-bulls continued to capitalise on the prospects of the German coalition deal while the interview of ECB Council member Ardo Hansson strengthened their conviction. Hansson mentioned that the ECB could halt its APP after September 2018 baring any negative surprises and that the appreciation of the EUR is "not a danger to the inflation outlook". We remain mildly bullish EUR eying our target at 1.25, although cognisant of short term risks including the German SPD special party conference on Sunday to validate an official coalition.

 

 

 

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