Daily FX Update, 19 May 2016

v  FOMC Minutes: Most Fed policy makers are ready to lift interest rates in June, if the economy improved v  UK labour market stands firm against Brexit uncertainty v  Poll shows majority of Britons reject Brexit v  Petronas pretax profit down 60% y/y to RM6.8 billion in the first quarter of FY2016

OVERNIGHT MARKET UPDATE: ·         US – The April FOMC Minutes showed that most members are ready to lift interest rates in June if the economy shows more life. “Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2% objective, then it likely would be appropriate for the Committee to increase the target range for the federal-funds rate in June,” the minutes read. ·         UK – The March labour market data were better than market expectations. Jobs rose 44,000 in the three months to March, beat the expectations of a zero rise. Meanwhile, the average earnings rose to 2.0% y/y, faster than the upwardly revised 1.9% annual gain in February. The average earnings also exceeded market expectations for a 1.7% y/y growth. ·         UK – A poll conducted for the Evening Standard newspaper by Ipsos Mori revealed 55% of Britons wanted the UK’s ties with the European Union to remain intact, while only 37% favoured a breakup. That result was also the largest lead in the past three months for the "Remain" camp, the Evening Standard said. ·         Currencies – USD rallied on the back of the Fed Minutes, but GBP rallied first as Brexit polls favoured the ‘remain’ camp and average earnings lifted. ·         Equities – US bourses finished little-changed following a choppy session as the latest Fed minutes stroke rate-hike fears. ·         Rates – US Treasury yields logged their largest daily jump since December on the back of the FOMC Minutes. CME Group’s FedWatch Tool showed investors are now betting a 34% chance that Fed will hike in June, up from the 4% chance on Monday. ·         Energy – Crude oil prices closed marginally lower as the USD gains in the wake of FOMC Minutes despite the release of EIA data which showed another fall in US output. ·         Precious Metals – Gold prices weakened as Fed minutes bolstered expectations that Fed could soon raise interest rates. Stronger USD also dampened the appeal of gold.

INDICATIVE MAJOR CURRENCIES Last Close 8.02 am Snapshot Expected Range for Today Bid Offer Low High USD/MYR 4.0505 4.0480 4.0860 4.0460 4.0910 JPY/MYR 3.6913 3.6710 3.7090 3.6600 3.7300 SGD/MYR 2.9422 2.9240 2.9610 2.9200 2.9800 EUR/MYR 4.5694 4.5440 4.5840 4.5200 4.6100 AUD/MYR 2.9524 2.9180 2.9550 2.9100 2.9800 GBP/MYR 5.9174 5.9130 5.9560 5.8800 6.0000 USD/JPY 109.73 110.02 110.43 109.62 110.62 EUR/USD 1.1281 1.1070 1.1380 1.1170 1.1280 AUD/USD 0.7289 0.7070 0.7380 0.7180 0.7280 Source: Bloomberg, AmBank