FW: RHB FIC Rates & FX Market Update - 14/11/17

 

 

14 November 2017

 

 

Rates & FX Market Update

 

 

Soft GBP Momentum Amid UK Political Woes

 

Highlights

 

¨   Global Markets: 2/10y USTs flattened overnight, driven by block trade flows, amid little news flow. Gilts outperformed Treasuries marginally overnight, although PM May's political woes have yet to translate into the bond markets, despite the impact on GBP movements thus far. An elevated UK CPI and core CPI reading due later today may drive further weakness in Gilts, although we think another BoE rate hike over the near horizon remains unlikely; stay neutral Gilts.

¨   AxJ Markets: Over in China, both new CNY loans and TSF came in marginally weaker than expectations, and significantly lower than September's readings; China's deleveraging efforts appear to continue weighing on credit growth and impulse. While more meaningful tightening of credit conditions are needed to curb China's credit appetite, investors are likely to take comfort in authorities' effort to boost the quality of Chinese growth, where another massive capital flight remains unlikely over the near-term; stay neutral CNY.

¨   GBPUSD fell c.0.4% overnight, and has been trading cautiously over the past few sessions, as PM May struggles politically against mounting opposition to her leadership and cabinet ministers' resignations. Brexit negotiations with the EU remain shaky at best amid mounting differences between the 2 sides, with little progress being made since the talks began. We continue to eye Sterling weakness over the medium term, with BoE likely to stay on the sideline for a long while amid various lingering tail risks facing the UK; remain cautious GBP over the medium term, and stay short GBPMYR at this juncture.

 

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