FW: RHB FIC Rates & FX Market Update - 4/1/18

 

 

 

4 January 2018

 

 

Rates & FX Market Update

 

 

FOMC Minutes Indicated Support for Continued Tightening

 

Highlights

 

¨   Global Markets: The Dollar broke off from its recent downward momentum, surging 0.34% overnight after FOMC minutes revealed that recent tax reform measures may offer a boon to the economy and inflation, despite several members still concerned over the tepid price environment. A few participants saw as appropriate additional tightening over Year 2018 relative to implied forecasts, given that financial conditions had not materially tightened since the hiking cycle. Front-end rates ticked higher after the release of the minutes, although longer-end rates remain unimpressed, with 10y yields falling c.2bps overnight; stay neutral USTs.

¨   AxJ Markets: Thailand's December CPI printed at 0.78% y-o-y (consensus: 0.99%), and notably below BoT's target range despite the stronger growth seen over Year 2017. MPC minutes revealed that while growth has picked up over 2017, economic recovery does not appear to be broad-based still with downside risks lingering on. The Bank expects 2018 headline inflation to average 1.1%, at the bottom of BoT's 1-4% target range, which should support a neutral policy stance over the foreseeable future; stay neutral on the THB.

¨   MYR climbed marginally against the USD overnight, although the currency appears to be losing ground against the dollar this morning amid the latter's strength post-FOMC. We still maintain a constructive view towards the currency, given sustained domestic growth and progressive fiscal consolidation efforts that could boost investors' sentiment surrounding the country after periods of underperformance versus peers.

 

 

 

 

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