FW: RHB FIC Rates & FX Market Update - 10/11/17

 

 

10 November 2017

 

 

Rates & FX Market Update

 

 

BNM Signalled Tightening in 2018 Amid Sanguine Economic Outlook

 

Highlights

 

¨   Global Markets: As expected, the proposed US tax plan was in the limelight again yesterday with developments from both House and Senate. Senate Republicans released their version of tax cuts revealing a different approach on the reform i.e. including a delayed implementation until 2019 of the corporate rate cut to 20% and the repeal of the deduction for state and local taxes, going against President Trump and House Republican's will to act immediately. The differences likely portend difficult and protracted negotiations between the chambers later in the budget process. The DXY (US Dollar Index) slid -0.35% consequently. We maintain our view of increasing chances of having no major legislation enacted before the end of year underscoring our prudent USD view.

¨   AxJ Markets: Chinese October inflation prints were above consensus expectations, with CPI at 1.9% y-o-y (consensus: 1.8%) and PPI at an elevated 6.9% y-o-y (consensus: 6.6%), with the latter buoyed by higher raw material input costs. Economic momentum remains resilient, with the PBoC likely to continue its tightening bias amid upticks in inflation and growth firmly above the government's 6.5% target; stay neutral CNY.

¨   The Malaysian Ringgit appreciated overnight with the USDMYR pair falling 0.54%, after BNM's MPC may consider reviewing the current monetary condition, a likely precursor to tighten into 2018. BNM noted that domestic growth has become more entrenched, and likely to persist into 2018. The central bank also took comfort in the Ringgit's appreciation, in line with fundamentals and our consistent view that the currency still remains undervalued; as such, stay constructive towards MYR over the medium term.

 

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