Daily FX Update, 08 January 2015

OVERNIGHT MARKET UPDATE:

·         In US, there was little new in the FOMC minutes, which were fairly balanced and consistent with the first rate hike coming around mid-2015. The Fed remains upbeat on the domestic economy, although appeared a little more concerned about the international economy. Inflation is expected to be low near term but this should be transitory and inflation should eventually rise as the effects of the fall in energy prices dissipate.

·         In US, the ADP employment report was stronger than expected, with private sector payrolls increasing 241k (mkt: +225k) in December. At the same time, the US trade deficit narrowed to USD39.0bn in November, driven by a decline in both exports (-1.0% m/m) and imports (-2.2% m/m).  

·         In Euro area, headline inflation for December declined 0.2% y/y falling into negative territory for the first time since September 2009. As expected, the main culprit behind the decline was the sharp fall in oil prices. While core inflation rose modestly to 0.8% y/y, the ECB clearly does not believe it has the luxury of looking through the volatility in headline inflation, given elevated unemployment and sluggish economic growth.

·         In the currency market, EUR weakness continues to be a major theme after the release of the weaker inflation data overnight. The AUD was trapped between the stronger USD, and improved sentiment in other markets.

·         US 10-year Treasuries sold off for most of the session before rallying after the FOMC minutes. The 10-year yields increased 3 bps to 1.97% from the previous closing.

·         US equities snapped their recent declines buoyed by the better jobs data from the US.  

·         Crude oil prices were higher, posting their first gains this week. WTI rallied following the release of EIA data which showed U.S. gasoline and distillate stockpiles rose last week whilst crude oil inventories fell, supporting demand from US refineries and subsequent demand from consumers for oil products.

Spot gold prices falling marginally, with strong US ADP jobs data in December helping to firm expectations of US interest rates rises.

INDICATIVE MAJOR CURRENCIES Last Close  8.05 am Snapshot        Bid                   Offer Expected Ranges for Today         Low                       High USD/MYR 3.5818 3.5570 3.5750 3.5470 3.5920 JPY/MYR (100) 2.9976 2.9810 3.0020 2.9600 3.0300 SGD/MYR 2.6714 2.6600 2.6840 2.6500 2.7000 EUR/MYR 4.2373 4.2070 4.2400 4.1800 4.2700 AUD/MYR 2.8837 2.8740 2.9030 2.8600 2.9300 GBP/MYR 5.4042 5.3710 5.4130 5.3400 5.4500 USD/JPY 119.49 119.10 119.30 118.70 119.70 EUR/USD 1.1830 1.1830 1.1860 1.1790 1.1900 AUD/USD 0.8051 0.8080 0.8120 0.8050 0.8150