FW: RHB FIC Rates & FX Market Update - 13/4/18

 

 

13 April 2018

 

 

Rates & FX Market Update

 

 

MAS Tightens Monetary Policy

 

 

 

Highlights

 

¨   Global Markets: The reprieve of the risk sentiment weighed on safe haven assets and supported the US Dollar yesterday as US President Trump flip-flopped his stance on trade while adopting a confusing tone on Syria saying attacks “could be soon or not so soon at all” perceived more conciliatory; the JPY (-0.46%) and Treasuries (10y +5.5bps) both retreated while the US Dollar rose (+0.20%). The US President is now considering re-joining the TPP and weighing whether to impose tariffs on Chinese products. While it might remain tactics ahead of negotiations, such a move would be a U-turn on one of his main campaign pledges. We are in the view that the political volatility increases uncertainties, a word that markets do not like underscoring our selective and tactical approach.

¨   AxJ Markets: In Singapore, retail sales for February strongly rebounded to 8.6% y-o-y, the economy expanded at a robust pace in the first quarter of 2018 at 4.3% q-o-q. The solid economic growth prospects supported the Monetary Authority of Singapore (MAS) to tighten its monetary policy by allowing the SDG NEER to appreciate, in line with the broad consensus. The USDSGD however holds above 1.31 on Friday morning as the USD strength has gained momentum (see above). Our Group Chief Economist’s view that the USD should strengthen over the course of 2018 underscores our neutral USDSGD stance. In the short term, the pair remains contained in a narrow range. We eye 1.2970 and 1.3375 as mid-term inflection levels.

¨   In Europe, the minutes of the ECB March meeting showed concerns over the risk of a trade war and unsurprisingly on the euro strength as a hurdle to reach the 2% inflation target. The EURUSD retreated on the day within its range, -0.33% d-o-d. The pair is in the middle of the two-month range just above 1.2300 reducing the scope of any short term opportunities. 1.22 and 1.25 remain the mid-term inflection level. On the EURSGD pair, watch the support at 1.6060 while the EURMYR, holding below 4.80 could retest earlier April low at 4.73 in the short-term horizon.