Daily FX Update, 27 May 2016

v  US durable goods increase on aircraft orders, but business investment remains weak v  Fed’s Governor Powell: Rate increase may be appropriate soon v  US pending home sales surge 5.1% to a 10-year high in April v  Q1 UK GDP growth revises lower to 2.0% y/y from the preliminary reading of 2.1% y/y v  Malaysia: US$160 billion trade target with China achievable

OVERNIGHT MARKET UPDATE: ·         US – Led by strong commercial aircraft orders, April durable goods orders rose 3.4% m/m and March’s gain was revised higher to +1.9%. However, core orders (ex-transport and defence) fell 0.8%, suggesting that business investment is still struggling. ·         US – The Fed Governor Jerome Powell stated that an interest rate hike may be appropriate fairly soon if upcoming data meet expectations of continued economic growth and a tightening labour market. The tone overall matched comments from other recent Fed officials, but fell short of openly calling for a June rate increase. ·         US – A gauge of pending home sales jumped 5.1% in April, rising to the highest since February 2006, with the pending home sales index hit 116.3 in April. ·         US – The initial claims dropped by 10,000 to a one-month low of 268,000 last week. ·         UK – The revision to Q1 GDP showed growth of 0.4% q/q, the same as the preliminary reading. However, on annual basis, the growth revised lower to 2.0% against the 2.1% initially reported. ·         Currencies – The US dollar closed lower against major currencies as weak core durable-goods orders raised doubts about summer Fed hike. Investors were also sitting on the sidelines ahead of US GDP and Yellen’s speech tonight.    ·         Equities – A quiet day on Wall Street as US equities ended sessions little changed after two days of strong gains as crude oil prices failed to move above US$50/bbl and investors brushed off better-than-expected economic reports.  ·         Rates – US Treasury yields dropped as weakness in core durable-goods orders stoked renewed scepticism that the Fed could raise interest rates this summer. Investors are also waiting for further signal from Yellen’s speech tonight. ·         Energy – WTI and Brent futures went through US$50/bbl on tightening supply but hit stubborn resistance at that key level, with near-term futures easing back slightly. ·         Precious Metals – Gold prices extended their slide despite the weakness in the US dollar as fundamental outlook on the yellow metal remains the same.

INDICATIVE MAJOR CURRENCIES Last Close 8.02 am Snapshot Expected Range for Today Bid Offer Low High USD/MYR 4.0765 4.0490 4.0830 4.0470 4.0895 JPY/MYR 3.7127 3.6940 3.7300 3.6800 3.7500 SGD/MYR 2.9656 2.9440 2.9800 2.9400 3.0000 EUR/MYR 4.5559 4.5350 4.5710 4.5100 4.6000 AUD/MYR 2.9408 2.9220 2.9570 2.9100 2.9800 GBP/MYR 5.9737 5.9480 5.9840 5.9200 6.0400 USD/JPY 109.80 109.38 109.79 108.98 109.98 EUR/USD 1.1176 1.1040 1.1350 1.1140 1.1250 AUD/USD 0.7214 0.7070 0.7380 0.7180 0.7280 Source: Bloomberg, AmBank