FW: RHB FIC Rates & FX Market Update - 6/2/15

6 February 2015

Rates & FX Market Update

USTs Pared Gains Ahead of US Jobs Report; BoE Left Policy Rate Status Quo; MYR Extended Overnight Rally

Highlights

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¨    USTs pared gains ahead of the strong expectations of US Non-farm payrolls later today, following the positively lower jobless claims print for the week-ended Jan 31. The extended optimism in the jobs market, where expectations for a pickup in January’s wage growth could prompt the market to re-price expectations of a pushback in the Fed’s rate hike, while unemployment rate and jobs creation is expected to maintain at 5.6% and >200K respectively. Meanwhile, UK’s resilience in the services sector was followed by BoE’s decision to maintain status quo, with Gilts extending losses, while GBP saw a relief rally to touch its intra-week high of 1.53/USD. EUR saw similar rebound while Core and Peripheral EGBs saw marginal rallies as the ECB continues to enforce Greek compliance to Eurozone rules. Separately, ACGBs topped overnight outperformance, ahead of the 4y bond auction.  

¨    Asian govies and currencies were mixed with MGS and MYR extending outperformance amongst regional peers. The surprise upside in Malaysia’s December exports was anchored by the stronger electronic exports, with higher trade surplus alleviating market concerns on Malaysia’s external position alongside the rebound in oil prices. Separately, small gains were recorded on longer-dated ThaiGBs shrugging off the modestly softer consumer confidence print as BoT reaffirmed its FY15 4.0% growth target, the first half of the year likely to grow by 4.5%; THB remained unchanged at 32.595/USD. Meanwhile, IDR marginally strengthened to 12,604/USD as GDP growth inched higher to 5.0% y-o-y in 4Q14, compared with 4.9% in 3Q14.

¨    GBPUSD saw relief rally to its intra-week high of 1.53 with optimism that the strong UK Manufacturing, Services, and Construction PMIs highlighted the ability of UK’s business activities to weather spillover effects of its biggest trade partner, Eurozone. Nonetheless, we maintain a bearish GBP view in the medium-term, given dovish BoE and UK’s election uncertainties ahead.

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