FW: RHB FIC Rates & FX Market Update - 13/6/18

 

 

 

13 June 2018

 

 

Rates & FX Market Update

 

 

Dot Plot in Focus as Markets Split Between 3-4 Hikes This Year

 

Highlights

 

¨    Global Markets: The much anticipated Trump / Kim meeting ended on a positive note as the two leaders agreed to improve the US / DPRK relationships by stopping hostile military actions against each other. However, the non-binding agreement signed, similar to one signed by both parties in 1993, lacks details and as such risks remain until the implementation of the areas of agreement. While North Korea started to improve the relations with its Southern neighbour earlier this year, the country has failed to abide by previous agreements in the past. On the US side, the President is known for his constant flip-flops and has already shown little consideration for binding agreement, such as the JCPOA for instance.

¨    AxJ Markets: Now, attention shifts towards the Fed meeting with a 25bps FFR hike priced in; market participants timidly positioned for such an outcome as the USD rose across the board ( DXY +0.22% d-o-d) and UST yields clinched 1-2bps higher across the curve. Once again, markets’ reaction will depend on the Dot Plot as the question is whether FOMC sees a fourth hike this year. We believe that the Fed will increase rate four times this year likely to send US yields higher and consequently support the greenback.

¨    Over in Singapore, April retail sales came in disappointing (0.4% y-o-y; consensus: 2.1%), although ahead of March’s -1.1% print. Poor computer/telecommunication equipment sales weighed down on the print, while the measure is losing its lustre from late-2017. While we do not think MAS will be overly-concerned at this stage, further weakness in domestic consumption could eventually weigh on October’s policy decision; stay neutral SGD.