FW: RHB FIC Rates & FX Market Update - 30/11/17

 

 

 

30 November 2017

 

 

Rates & FX Market Update

 

 

Rebound in Chinese PMI Prints Offer Comfort to Investors

 

Highlights

 

¨   Global Markets: A quiet US trading session on the currency markets as the Dollar was little changed overall (DXY: +0.02% d-o-d). Treasury sold-off with 10y UST yield climbing 6bps over the day. Yellen's comments on US growth "increasingly broad based" combined with an upward revision for 3Q17 GDP growth, developments on the tax reform with a vote in Senate due today and IG corporates issuing debt weighed on Treasuries. We remain neutral UST ahead of the likely and largely priced-in December hike and debt ceiling negotiations. The Sterling Pound was the best performing G10 currency (GBPUSD: +0.44% d-o-d) as market participants remained optimistic on a possible agreement on Brexit divorce although PM May reaffirmed that negotiations are ongoing which could curb the GBP momentum; remain neutral GBP.

¨   AxJ Markets: The official Chinese manufacturing PMI rebounded to 51.8 in November (consensus: 51.4), after a mild dip in October, as both local and foreign demand held up; services PMI jumped to 54.8 as well. The prints are likely to re-assure Asian investors over the near horizon, with trading sentiment likely to hold into the December FOMC meeting, where the Fed is widely expected to deliver another 25bps hike to the FFR. We remain neutral to mildly bullish towards Asian currencies, with the stable, positive performance likely to hold up into early-2018.

¨   MYR broke below 4.10 and strengthened towards the 4.08 handle (+0.5% overnight) ahead of OPEC's decision, with consensus leaning towards a continued commitment to reduce output along with Russia's support. Any perceived softness by key OPEC members or Russia will likely be oil-negative, although unlikely to permanently dent the Ringgit over the coming weeks, given improving investors' sentiment ahead of a possible BNM tightening in early-mid 2018. We continue to eye a marginally higher MYR over the coming months.

 

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