FW: RHB FIC Rates & FX Market Update - 13/12/17

 

 

 

 

13 December 2017

 

 

Rates & FX Market Update

 

 

FOMC Decision Due Later Today to Keep Traders on Edge

 

Highlights

 

¨   Global Markets: Strong PPI print (3.1% y-o-y) likely cemented an already almost certain Fed rate hike due later overnight in Asia; FFR Future implied probability firmly stands at 100%. USD and UST have risen ahead of the decision and should thereafter soften post-decision in a similar way than following the three previous hikes. The Dollar rose +0.12 d-o-d also bolstered by the progress of tax reform reconciliation. However we remain watchful of near and medium term risks such as the Alabama Senate race where stakes are high for Republicans. Should they lose the seat, it would bring down their uphill majority to a razor-thin 51-49 majority and could potentially upend their agenda. Lastly, the current funding bill expires on December 22^nd. We remain neutral USD and UST.

¨   AxJ Markets: Moving on to Singapore, October retail sales print disappointed at -0.1% y-o-y (consensus: +1.0%), with Autos and computer/telecommunication equipment remaining a drag on overall headline print. With domestic sluggish trends to persist for a while longer, overall hawkish sentiment should be held back over the coming months, with authorities likely to stay sceptical towards the Singapore economic outlook despite the brightening external sector; stay neutral SGD over the coming months.

¨   AUDUSD climbed 0.43% overnight despite lower ACGB yields after November business confidence deteriorated m-o-m, with bullish sentiment likely driven by an uptick in iron ore prices amid a broad commodity rally. We continue to pencil in delays in the RBA rate normalisation process, although less stretched valuations alongside continued improvements in the Australian economy will likely offer some support to the currency; AUDUSD likely to be range-bound over the coming months, and relative to our risk-reward view, we recommend a neutral stance towards the currency.

 

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