Snapshot Summary

Global FX: The dollar stumbled on Tuesday amid speculation about Trump's incoming economic team.

Global Rates: UST yields steadied near 4.80% as investors await the CPI report

MYR Bonds: Local govvies saw improved sentiment driven by the auction of 15Y GII

USD/MYR: Ringgit took advantage of the softer dollar during the Asia session

Macro News

Australia: The Westpac-Melbourne Institute Consumer Sentiment Index in Australia fell by 0.7% to 92.1 points in January 2025, marking its second straight month of decline and reflecting persistent pessimism.

US: The NFIB Small Business Optimism Index in the US surged to 105.1 in December 2024, reaching its highest level since October 2018. Up from 101.7 in November, it exceeded predictions of 100.8. This marks the second consecutive month the index remains above the 51-year average of 98, driven by an improved economic outlook following the election.

US PPI rose by 0.2% m/m in December 2024, lower than November's 0.4% increase and below forecasts of 0.3%. The prices of goods increased by 0.6% m/m, with a notable 9.7% m/m rise in gasoline prices.

Fixed Income

Global Bonds: The UST market closed within a narrow range from the day before. Yield remained near 4.80%. There was a tough impetus for higher yields yesterday after data showed that producer prices in the US rose moderately last month by 0.2%, compared to an unrevised 0.4% rise in November. Investors now await the latest US CPI print.

MYR Government Bonds: The Malaysian government bond market saw improved sentiment, and we noted modest yield declines on tenors from 5Y up to 15Y. The push on sentiment was driven by the auction for the 15Y GII (GII 07/40), which attracted firm demand, where the final BTC was held above 4x. Firm MYR amid USD weakness also aided local bond sentiment.

MYR Corporate Bonds: Mixed onshore corporate bond market prevailed. Realignment on select names continued. Amongst the notable mixed movements is the AAA-rated PASB. Of these, PASB 02/34 rose 2 bps to 4.00% and PASB 06/28, which fell 2 bps to close at 3.86%.

Forex

US: The greenback took a hit Tuesday on rumours that Trump's incoming economic team - which is suspected to be led by Bessent, Hassett, and Miran - may push for incremental monthly tariff hikes (2-5%) to bolster negotiating leverage and limit inflation. The weaker-than-expected December PPI piled on additional pressure, fuelling dovish Fed expectations and driving the dollar further throughout the day.

Europe: The EUR notched up 0.6% gains, propped up by a softer dollar and cautious remarks from ECB's Holzmann suggesting the central bank might not cut rates this month due to "hiccups" in Eurozone inflation. Yet, ECB Chief Economist Lane sounded cautious, stressing that while additional easing is possible this year, it must be balanced to avoid recession and keep inflation in check. Meanwhile, the GBP gained 0.1%. Sterling climbed with UK fiscal jitters and elevated Gilt yields, still in traders' focus. Most recently, PM Keir Starmer reaffirmed his support for Finance Minister Rachel Reeves, which may spell alleviation on the political front. However, if Wednesday's UK inflation data undershoots forecasts, we could see fresh bets on BoE rate cuts, easing upward pressure on Gilt yields.

Asia Pacific: The JPY edged lower to 157.96 as traders brace for next week's BoJ meeting, with odds of a January rate hike hovering around 57% despite Deputy Governor Himino's more balanced stance. Still, with high import costs and US policy risks on the table, a potential surprise BoJ move to rein in yen weakness could catch the market off-guard. The yuan increased from a 16-month low to around 7.331 as the dollar paused and the PBoC set a stronger daily fix. PBoC Governor Pan Gongsheng's pledge to maintain currency stability also helped lift the offshore yuan, with the central bank rolling out measures - like expanded foreign borrowing and ramped-up Hong Kong yuan bill issuance - to keep a lid on further weakness.

Malaysia: The ringgit increased and posted 0.1% gains yesterday as the dollar was softer during the Asia session. In tandem, Asian currencies were mainly on the upside as well. Should the advance Malaysia 4Q2024 GDP print come out better than expected this Friday, there is a chance the full-year growth could beat our expectations of 4.9%.

Other Markets

Gold: Gold inched higher to USD2,677/oz, propped up by softer-than-expected PPI (0.2% vs. 0.3% forecast) and rumours of Trump's gradual tariff plan - both knocking the dollar lower.

Oil: WTI and Brent slid from a five-month peak to suspected profit-taking.

Source: AmInvest Research - 15 Jan 2025