Monday, January 29, 2018

FW: RHB FIC Rates & FX Market Weekly - 29/1/18

 

 

 

29 January 2018

 

 

Rates & FX Market Weekly

 

 

Fed’s Yellen Final Meeting Unlikely to Bring Surprises

 

Highlights

 

Global Markets

¨   Fed policymakers gather for a rather symbolic meeting on January 31st as Chair Yellen’s term expires on February 3rd. The interest rate benchmark is expected to be left unchanged. On the political front, president Trump will deliver his first State of the Union speech, usually a key statement defining the Oval Office’s priorities with investors hoping to get precise details on future policies given the recent shift as “America First” rhetoric resonates stronger, while Nafta talks continue. On the economic front, labour data and core PCE will be scrutinised. We remain neutral UST watching the key 2.65% resistance. Although somewhat stretched, the USD bear trend is unlikely to find support but 87.20 could be that level on the DXY; remain mildly bearish USD on rising protectionism fears.

¨   After ECB’s Draghi painted a positive economic picture for the Eurozone, attention will shift towards key economic data with 4Q17 GDP growth for the EU and France (EU growth expected at 2.7% y-o-y), inflation for the EU, Germany and France. Although not the base case, negative surprises could support the intermediate consolidation scenario for the EURUSD within the 1.2225 / 1.2630 area. In the UK, PMI are due in the week ahead. UK watchers will also have an eye on the EU ministers meeting in Brussels who may decide on new Brexit directives and Carney’s speech before the Parliament. The GBP is the second strongest performing currency so far this year, only to be outperformed by the NOK, and a consolidation could happen should the hard Brexit scenario resurfaces; remains neutral GBP.

¨   In Japan, watch IP, retail sales and employment data while financial market participants will continue to focus their attention on BoJ Governor Kuroda’s succession overs concerns on policy changes which could spur volatility; remain neutral JPY. Onto Australia, investors will zoom into the 4Q17 CPI print due ahead of the February RBA policy meeting. Consensus expects inflation to tick higher y-o-y versus 3Q17 prints, with any upside surprises likely to drive hawkish advances on Australian assets as the labour market continues to exhibit strength, although we note that the measures have mostly disappoint over Year 2017; we stay neutral towards ACGBs at this juncture.

 

AxJ Markets

¨   Investors kick off the usual monthly PMI affairs with the official Chinese numbers alongside the Caixin manufacturing index over the month of January, as the state and trajectory of the world’s second-largest economy remains a keen interest among global investors. Chinese numbers are expected to remain steady ahead of the Lunar New Year holidays, with bond investors likely to closely monitor liquidity and funding developments within the onshore markets; we still expect higher CGB yields over the coming months.

¨   Elsewhere, expect a relatively quiet week in Singapore with only January PMI numbers due. Expect the SGD to take cues from USD and global market movements, with the USDSGD pair possibly testing the 1.30 psychological support if dollar softens further, in view of a packed US calendar; we remain neutral towards the SGD. Over in Thailand, expect a relatively packed calendar in the week ahead, although the greater focus will likely to be on the January CPI print, having been mostly below-target over the bulk of 2017. Our base case remains for BoT to hold its benchmark rate over the year, with market participants likely to concern over any potential BoT response over the recent bout of THB appreciation; stay neutral THB.

¨   Over in Malaysia, BNM’s recent 25bps OPR hike will likely continue to reverberate through the MGS and MYR, although we may see recent gains tapering off as investors’ priced out further tightening over the immediate term, with consensus and us expecting no further shifts in policy over the coming months; eye MYR and MGS movements in the week ahead, and remain mildly constructive on the currency over the medium term. Lastly in Indonesia, January CPI due in the week ahead is unlikely to materially alter BI’s monetary policy outlook, with inflation appearing set to lie within the targeted band. Expect the IDR to remain broadly stable against regional peers over the near term, even as USDIDR fell below 13,300 on the weaker USD; stay neutral IDR.

  

Weekly Positioning

 

 

Rates

FX

Overweight

 

 

Mild Overweight

 

MYR

Neutral

UST, GILT, Core EGBs, ACGB, SGS, CGB, MGS, IndoGB

USD, GBP, EUR, AUD, JPY, THB, SGD, IDR, CNY

Mild Underweight

ThaiGB

 

Underweight

JGB

 

 

 

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Related Posts with Thumbnails