FW: RHB FIC Rates & FX Market Update - 13/2/18

 

 

 

13 February 2018

 

 

Rates & FX Market Update

 

 

Trump Infrastructure Plan Unlikely to Materialise This Year

 

Highlights

 

¨   Global Markets: In the absence of economic releases, Rates and FX markets took cues from the improving risk sentiment as stocks continued to recover: the US Dollar rebound stalled (-0.34% d-o-d) while EUR, JPY, GBP and AUD added gains and 10y UST yield hovered in the 2.85% area (+0.7bps d-o-d). The USD failed to get traction from Trump’s infrastructure plan which got a cold reception as (i) the US fiscal position is under close scrutiny and since (ii) such a bill would require bipartisan congressional cooperation unlikely to materialise in an election year. Lastly, the proposal for a “reciprocal tax”, although not a new rhetoric, continues to put protectionism under the spotlight, likely to weigh on sentiment; remain mildly bearish USD.

¨   AxJ Markets: Over in Singapore, retail sales climbed 4.6% y-o-y in December (consensus: 4.7%), although the measure excluding motor vehicles remain low (+0.6% y-o-y). Given lingering apprehensions, we eye the upcoming trade data for any hints of external strength, which may prompt an April MAS tightening. Any domestic weakness will likely push MAS towards the side of caution; stay neutral SGD.

¨   The USDMYR pair was flat overnight as investors remain cautious ahead of US CPI print due later this week, where a strong print may reignite the sell-down of risk assets, and eventually impact the Ringgit. We eye a stable MYR ahead of US inflation release, with any upside surprise likely to further pressure the Ringgit, although the 4.00 psychological and trend resistance may offer relief to Malaysian investors; stay mildly constructive on the currency over the medium term.