FW: RHB FIC Rates & FX Market Update - 9/11/17

 

 

 

9 November 2017

 

 

Rates & FX Market Update

 

 

BNM Rate Decision Due Today

 

Highlights

 

¨   Global Markets: The tax reform developments continue to drive the short term USD movements: the House committee entered a third day of negotiations, the Republican Senate is expected to release their bill on Thursday while news reported that Republican leaders could consider a one-year delay in the corporate tax cut which was not ruled out by Treasury Secretary Mnuchin either although stating President Trump's preference to have it start in 2018. The news weighed on the USD and the DXY ended the day lower (-0.05%). Remain neutral USD and UST. In the UK, the GBP was the weakest currency under our coverage and the only G10 currency underperforming the USD yesterday (-0.39%) as political turmoil continue to be a real nuisance to PM May after another Cabinet Minister resigned. We remain neutral GBP and continue to watch the 1.3065 support to be a short term inflection level for the GBPUSD while maintaining a good conviction for our short GBPMYR idea to drift further down towards our target (see below).

¨   AxJ Markets: In Malaysia, BNM is setting up interest rate policy today with OPR expected to be left unchanged at 3.00%. Investors are likely to watch the MPC statement seeking for growth and inflation outlook and possible consequences on monetary policy for 2018; Malaysian assets could get a boost should the rhetoric turn to a more upbeat stance. Against the backdrop of stronger-than-expected economic growth in particular (watch IP print today, expected to remain strong) and the stronger commodity prices, we continue to expect the MYR to remain moderately supported against the USD and the USDMYR pair to average 4.22 in 4Q17.

¨   The Bank of Thailand (BoT) left its interest rate benchmark unchanged at 1.50% while acknowledging some improvement in domestic demand and stating that inflation may accelerate to its target range (2.50% +/- 1.50%) next year. The THB consequently appreciated, with the USDTHB pair declining to 33.12 (-0.11% d-o-d). Although growth has picked up this year, on the medium term horizon, risks persist with an elevated debt burden for households and firms while BoT remains concerned over potential currency volatility despite stabilising movements over the past 3 months. We remain neutral on the THB with the USDTHB pair expected to average 33.10 in 4Q17.

 

 

 

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