Snapshot Summary…

Global FX: Dollar index declines on the fall of US Treasury yields

Global Rates: The UST yields fall slightly as traders weighed the latest JOLT data and comments by Fed Chairman

MYR Bonds: The ringgit government bond market traded mixed on Tuesday

USD/MYR: The ringgit weakened and marked fourth straight days of falling

Macro News

United States: The number of job openings surged by 221,000 reaching 8.140 million, surpassing the market consensus of 7.91 million. This increase followed a revised figure of 7.919 million in April, which was the lowest in three years. At the same time, the number of job quits was little changed at 3.46 million and it translates into job quits rate (a metric that measures voluntary job leavers as a proportion of total employment) was 2.2%.Eurozone: The inflation rate in the Euro Area decreased to 2.5% y/y in June 2024 after briefly increasing to 2.6% in May. Prices for food, alcohol, and tobacco rose at a slower rate, 2.5% y/y as compared to 2.6% in the previous month. In addition, core inflation, which excludes energy, food, alcohol, and tobacco, unexpectedly stayed the same at 2.9% annually, contrary to the anticipated 2.8%. The same consumer inflation increased by 0.2% m/m. On another note, the unemployment rate in the Euro Area was unchanged at 6.4% in May 2024, in line with market expectations. However, the number of unemployed individuals increased by 38,000 compared to the previous month.

Fixed Income

Global bonds: UST yields fell slightly as traders weighed the latest US Labor Department data and comments by Fed Chairman Powell. The Chairman said the Fed needs more data before lowering rates to ensure recent weaker inflation data properly reflect underlying price pressures. Meanwhile, the Labor Department indicated that job openings rose by 221k to 8.14 million in May slightly higher than market expectations. Elsewhere, Bund yields dipped but remain near a three-week high, as Eurozone inflation slowed to 2.5% in June.

MYR Government Bonds: The ringgit government bond market was traded mixed yesterday following the 10Y UST yield retracing by about 4 bps in the Asian session amid a steepening bias in view of US fiscal and UST supply concern. Yesterday saw the 3Y MGS closed 1 bps lower and the 10Y MGS closed 1 bps higher.

MYR Corporate Bonds: There was a modest net buying bias in the ringgit corporate bond market yesterday, aided by interest on select power bonds. Notable trades include AAA rated Tenaga 08/40 which fell 10 bps to 4.13% and Tenaga 08/33 which shed 4 bps to 3.96%. AA1 rated YTL Power International 08/32 rose 3 bps to 4.00%.

Forex

United States: The dollar index declined 0.2% to 105.72, driven by a decline in US Treasury yields and dovish comments from Fed Chair Powell. However, the dollar losses were contained following the unexpected rise in US May JOLT job openings, indicating strength in the labour market which is seen as hawkish for Federal Reserve policy.

Europe: The euro fell as much as 0.3% during the session after economic data came out from the eurozone pointing towards mixed developments. Headline inflation has slowed as per market expectations, but core inflation remained unchanged. The ECB Governing Council Mario Centeno said that the central bank could cut interest rates “few more times” this year to prop up the economy, which sounded starkly dovish and may have pressured the euro as well. In the UK, the GBP rose and ended the day at 1.269 or 0.3% d/d higher, in tandem with the 0.3% drop in EUR/GBP due to diverging stances of central banks between the ECB and the BoE where the former has already trimmed its policy rate while the latter is taking more measured approach in doing so.

Asia-Pacific: The USD/JPY posted another fresh 38-year high as its intraday range reached 161.74-161.27 compared to prior day’s 161.73-160.63. In China, the CNY hit 7.27 level, its weakest level since last November amidst PBoC letting its currency to fall slowly as the central bank fixed the daily yuan midpoint fixing at 7.1291 vs. 7.1265 on Monday. The Australian dollar rose 0.1% on the day after RBA meeting minutes for June’s policy meeting showed the board members were split over to raise or to maintain its interest rates but the case to leave it unchanged was stronger, paring some of the early ‘hawkishness’ following the meeting.

Malaysia: The ringgit depreciated 0.2% and marked fourth straight days of falling amidst sentiment remained dollar-focused and biased towards US labour market data. In addition, recent drop in Malaysia’s manufacturing PMI may suggest the recovery among manufacturers are staggered rather than a smooth one.

Other Markets

Gold: Gold shed a slight 0.1% to USD2,329/oz amidst a whipsaw session as traders await for more US data to gauge clearly the Federal Funds Rate (FFR) path over the upcoming months.

Crude oil: Oil prices slipped as Brent dipped 0.4% and WTI shed 0.7%, taking a relief from rally amidst elevated Middle-East geopolitical tension and the Atlantic hurricane season concerns.

Source: AmInvest Research - 3 Jul 2024