FW: RHB FIC Rates & FX Market Update - 22/11/17

 

 

22 November 2017

 

 

Rates & FX Market Update

 

 

Focus To Shift Towards FOMC Minutes

 

Highlights

 

¨   Global Markets: The US curve flattened closing below 60bps for the first time since 20017 as short term Treasury yields climbed (2y: 2.1bps) tracking expectations of the likely December rate hike while longer tenors dropped (10y: -1.1bps) as inflation expectations are sluggish. Our anticipated inflation indicator militates against higher price pressures as explained in our previous Strategic Allocator.  Janet Yellen speaking in New York acknowledged that the Fed faces a delicate balancing act by managing its dual mandate: avoid a "boom-bust" cycle given the economic expansion and tight labour market while increasing interest rates too fast might send the country in recession. This leaves the Fed to fine tune its policy and can force the FOMC to adopt a more discretionary approach: remain neutral UST.

¨   AxJ Markets: In the absence of any economic release in the region, regional markets traded by taking cues from global developments. With a broad Dollar under pressure, Asian currencies closed in positive territory. Malaysian Foreign Reserves will be released today and should the print show continuing improvement, the Ringgit would remain supported, on the way towards 4.10 against the USD, underscoring our constructive and positive outlook on the currency.

¨   The EURUSD pared some of Monday's losses holding above the 1.17 support (close: 1.1772); the risk coming from the short term uncertainty over the German political landscape is likely to be slowly digested by market participants. The recovery on the pair could also be attributed to some weakness in the Dollar as Nafta talks progress and push the Mexican Peso and Canadian Dollar higher as Mexico adopted a rather tough stance against some of the proposals of Trump administration.

 

 

 

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