FW: RHB FIC Rates & FX Market Update - 19/9/17

Subject: RHB FIC Rates & FX Market Update - 19/9/17

 

 

19 September 2017

 

 

Rates & FX Market Update

 

 

Robust NODX Expansion Did Little to Bolster Strength in SGD

 

Highlights

 

¨   Global Markets: While BoE's Carney speech reiterated the moderately rising prospect of a BoE Bank Rate hike over the coming months, movements on the GILT curve remained marginal, with yields on the front end of the curve declining by 1bp overnight. In view of lingering downside risks to UK's economic growth outlook amid Brexit woes, we expect BoE's rate hike to be extremely gradual at best, positioning for a steeper GILT curve over the medium term, with expectations for the Bank to remain relatively tolerant towards moderately overshooting CPI prints over the coming year.

¨   AxJ Markets: Singapore's NODX and Electronics Exports recorded a robust expansion of 17.0% and 21.7% y-o-y (July: 7.6%; 15.3%), outperforming consensus expectations by a large margin. Despite so, the divergent pace of growth between externally and domestically oriented industries is likely to keep MAS monetary policy framework unchanged in October, limiting the extent of SGD's appreciation against regional currencies. USDSGD inched modestly higher yesterday against the backdrop of strengthening USD, where we opine for a neutral view on SGD to remain appropriate over the medium term, while the gradually tightening domestic liquidity is also likely to continue fuelling a tighter SGS-UST spreads over the coming months.

¨   USDCNY pulled back sharply to 6.5752 (+0.34%) yesterday ahead of the quarter end regulatory inspections and China's National Day Golden Week holiday. While the tight domestic liquidity has abated moderately with PBoC actively participating in the OMO, the Central Bank is likely to remain prudent in managing domestic liquidity given strong commitment towards deleveraging, which could keep the USDCNY pair consolidating below the 6.65 resistance over the near term; maintain neutral view on CNY.

 

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