Daily FX Update, 20 May 2016

v  Fed’s Dudley points to interest rate hike in June or July v  US initial jobless claims fall back to 278,000 in mid-May v  Philly Fed index dips to -1.8 in May, the eighth negative reading in nine months v  UK retail sales increase by 1.3% in April as lower prices helps to boost sales v  Bank Negara Malaysia remains interest rate at 3.25%

OVERNIGHT MARKET UPDATE: ·         US – The New York Fed President William Dudley, voting member:  “If I am convinced that my own forecast is sort of on track — then I think a tightening in the summer, the June, July timeframe is a reasonable expectation.” “I am actually quite pleased that that probability has in fact moved up,” Dudley added. ·         US – The initial jobless claims in the period stretching from 8th May to 14th May fell by 16,000 to 278,000, after a sharp 20,000 increase in the first week of May.  ·         US – The Philadelphia’s Fed index slipped to negative 1.8 in May from negative 1.6 in April, far below market expectations to rise to a reading of positive 3.0, as the new-orders index fell to negative 1.9 in May from a flat reading in April. This is also the eighth negative reading in the past nine months.   ·         UK – The headline retail sales rose 1.3% m/m and March's fall was revised significantly to -0.5% from the initial reading of -1.3%. On yearly basis, the retail sales were 4.3% higher. However, the report also showed that the total average store prices in April were 2.8% lower than a year earlier, dragged down by the drop in fuel prices. ·         Currencies – It was still a dollar and sterling show from a news perspective. Fed Dudley confirmed June is a “live” meeting helped to support USD, while the rebound in UK retail sales helped to keep sterling pound stronger. ·         Equities – US stocks ended lower on mounting fear that the Fed’s next interest-rate hike could come as early as June. S&P500 closed 0.4% lower and Dow Jones fell 0.5%. ·         Rates – US Treasury yields closed lower as market players assessed a batch of mixed economic reports and considered increased expectations for a rate increase in June following hawkish comments from other Fed officials. ·         Energy – Crude oil prices held up relatively well as worries about supply disruptions limited the sell-off. ·         Precious Metals – Gold prices dropped as the increase in probability for rate hike in June and a stronger USD dampened demand for the yellow metal.

INDICATIVE MAJOR CURRENCIES Last Close 8.02 am Snapshot Expected Range for Today Bid Offer Low High USD/MYR 4.0820 4.0670 4.0990 4.0650 4.1100 JPY/MYR 3.7180 3.6980 3.7310 3.6900 3.7600 SGD/MYR 2.9571 2.9430 2.9760 2.9400 3.0000 EUR/MYR 4.5751 4.5570 4.5900 4.5300 4.6300 AUD/MYR 2.9456 2.9350 2.9680 2.9200 2.9900 GBP/MYR 5.9671 5.9430 5.9740 5.9100 6.0300 USD/JPY 109.79 109.71 110.12 109.31 110.31 EUR/USD 1.1208 1.1050 1.1360 1.1150 1.1260 AUD/USD 0.7216 0.7070 0.7380 0.7180 0.7280 Source: Bloomberg, AmBank