12 June 2018
Rates & FX Market Update
Flattish FX Markets Ahead of Trump-Kim Summit, G3 Central Banks
Highlights
¨ Global Markets: Financial markets were relatively quiet on Monday somewhat shrugging off the chaotic G7 summit and in a wait-and-see approach ahead of today’s Trump / Kim meeting and G3 central banks decisions due later this week. Risk appetite modestly improved with UST yields drifting slightly higher. The US / North Korea summit’s outcome is unpredictable in nature; should it go the wrong way safe haven assets could rally as we believe investors are leaning towards optimism.
¨ AxJ Markets: Over in Malaysia, April Industrial Production expanded 4.6% y-o-y, marginally ahead of consensus expectations, underpinning Malaysia’s robust growth trajectory. News media reported that the PM nominated Nor Shamsiah, a former deputy governor with 30 years of experience at the central bank, as the next BNM governor. While her expertise mainly lies in banking supervision and financial system stability, an experienced central banker at the helm could offer some assurance to investors, as Malaysia navigates through headwinds from US monetary tightening; stay neutral MYR.
¨ The USDJPY was the biggest mover overnight; the Yen weakened -0.58% against the USD with renewed optimism on the geopolitical front as discussed above. Such a move corroborates that investors are positioned for a positive outcome likely to spill over and ease US – China relations. Lastly US CPI due later today are unlikely to alter Fed’s decision due tomorrow but the USDJPY could face higher upward pressure as monetary policies diverge; watch the 110.85 / 111.00 resistance area.
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