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USD Gains To Moderate: Global Markets Daily
USD Gains To Moderate: Global Markets Daily
G7 Currencies
GBPUSD – Big Week for GBP. GBP losses since mid-Apr showed tentative
signs of slowing. Nonetheless uncertainties on Britain’s future
relationship with EU and PM May’s leadership are sources of volatility
for GBP this week. PM Theresa May has about a few days to strike a
“compromise” with her “war cabinet” over Britain’s future customs
relationship with EU or face a choice staying in EU after Brexit or
leaving the EU without a pre-agreed deal on hand. A decision is
expected sometime this week. For the upcoming BoE MPC meeting on
10th May, we see room for BoE to keep policy rate on hold at 50bps as
inflation decelerated faster than expected amid concerns on global
growth momentum and trade war. While growth and activity indicators
show momentum is decelerating. OIS futures showed that implied
probability of hike at the upcoming meeting in May has been
dramatically cut to under 20% (3 May) from 99.9% (early Apr). A rate
hike was thought to be a done deal until the poor run of inflation, wage
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USDJPY – Downside Risks. USDJPY reversed its gains towards the end of
last week with the pair trading back below the 109-handle to 108.65 on
4 May, tracking the 10Y UST yield move ahead of the payrolls data
release. Dip in US unemployment rate sent UST yields and with it, the
USDJPY, higher to end the week back above the 109-handle. Since then,
softer UST yields and USD is weighing on the USDJPY and dragging the
pair back below the 109-handle. Geopolitical and trade tensions could
trigger safe haven proxy plays and continue to weigh on the pair in the
week ahead given handful of external political events ahead. These
events include the NAFTA trade talks starting on 7 May, 12 May deadline
for US to waive Iran sanctions and the ability of PM May to hold her
cabinet together with a compromise Brexit plan later this week.
Meanwhile, the political scandals surrounding PM Abe continues to
simmer. We continue to watch the evolving political saga and caution
that failure resolve these issues could undermine support for his
government and his position as PM. Further erosion of support for PM
Abe could embolden a challenge to his leadership of the ruling LDP in
Sep, potentially putting Abenomics and BOJ’s massive stimulus
programme at risk and puts downside pressure on the pair. Pair was last
seen at 108.85-levels. Daily bullish momentum is dissipating, while
stochastic shows signs of turning lower from overbought conditions.
Bullish bias on the weekly chart remains intact. This suggest that fatigue
is settling in among USDJPY bulls and some upside momentum could be
losing steam temporarily in the near term. Break below interim support
at 108.70 (100DMA) could point to further downside towards the 108-
levels. Resistance seen around 110.20 (200DMA). Week ahead has BOJ
minutes of 8-9 Mar policy meeting on Mon; household spending (Mar) on
Tue; labor cash earnings, leading index (Mar) on Wed; current account
(Mar), BOJ summary of opinions of 26-27 Apr policy meeting on Thu.
NZDUSD – RBNZ Meeting This Thu. Kiwi losses (more than 5%) since
mid-Apr slowed this week. Pair was last seen at 0.7010 levels. Bearish
momentum on daily chart is waning while stochastics is showing signs of
turning from oversold conditions. Support at 0.6990, 0.6960 levels
(76.4% fibo retracement of Dec low to 2018 high). We stick to our
tactical bias to buy on dips. Resistance at 0.7050/60 levels (61.8% fibo).
Break above could test 0.7130 levels. We expect RBNZ to keep OCR on
hold at 1.75% at its upcoming meeting on 10 May amid softer inflation
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outlook and signs of moderation in activity. This MPC will see Adrian Orr
chairing for the first time since appointment in late-Mar. Focus will be
on his tone and bias in the press conference. Week ahead brings 2Y
inflation outlook on Tue; Card spending (Apr) on Wed; RBNZ Meeting;
RBNZ Gov speaks; Finance Minister Pre-Budget speech on Thu; Food
prices, BusinessNZ Mfg PMI (Apr)
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AUDSGD – Upside Bias. This cross came off from last Fri highs to levels
around 1.0040. MACD and stochs still looks to head higher. Support now
seen around 1.0020 and this cross could head higher towards 1.0093
(21-DMA) before the next at 1.0149 (50-DMA). We look for AUDSGD to
head towards the 1.01-figure before the next resistance at 1.0160.
Stochs and MACD turning higher now and intra-day risks are to the
upside.
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FX Research
1m USDIDR NDF – Still Sideways. 1m USDIDR NDF rose last week amid
higher UST yields and USD, touching a 2018 and two-and-a-half-year
high of 14126 on 2 May. Official agent activities probably have helped to
ease the 1m NDF from that high last week. The sell-off in equities amid
weak corporate earnings especially for those reliant on domestic
consumption weighed on the IDR last week. Foreign investors sold
USD192.9mn of equities last week. Meanwhile, they had sold
USD173.4mn in debt on 30 Apr-3 May (latest data available). Further net
foreign portfolio outflows should weigh on the IDR and keep the 1m NDF
supported. In addition, elevated commodity prices, including oil, could
translate into a greater financial burden on the government’s fiscal
May 7, 2018 7
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MGS yields edged lower on the back of a strong auction for 15.5y
MGS 11/33. The new 15y MGS benchmark garnered a commendable
bid/cover of 2.72x and averaged 4.642% in yield. After auction there
were no trades on the bond in secondary space. Market’s focus this
week will be on the general elections and MPC meeting the day
after.
Muted day for MYR IRS market with no trades concluded, though the
curve lowered slightly amid firmer government bonds. Likely a quiet
week ahead given general elections. 3M KLIBOR stayed at 3.69%.
Corporate bonds were supported taking cue from firmer govvies with
levels more or less unchanged. AAA credits better bid at the long
end, with real money buying Danga 2030s. AA space saw good
demand in MEX II and SPG long end bonds. GG space was muted,
lacking bids. Corporate bond yields seem attractive, but spreads are
tight against MGS. All eyes turn to the election this week.
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FX Research
Change
SGS Previous Bus. Day Yesterday’s Close
(bps)
2YR 1.95 1.94 -1
5YR 2.20 2.18 -2
10YR 2.61 2.59 -2
15YR 2.82 2.82 -
20YR 2.84 2.83 -1
30YR 2.94 2.93 -1
Source: Maybank KE
SGD IRS rates marked down by 1-3bps at the open with the curve
flatter. SGS prices started higher but soon slipped back close to
previous levels amid tepid buying interest. Players remained
cautious ahead of the US job data and sellers capped any upside in
bond prices. SGS yields and SGD IRS ended 1-2bps lower. Swap
spreads have been tightening with most spreads now at single digits
to low teens.
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Rates Indicators
Analysts
IDR Gov’t Previous Bus. Yesterday’s Change
Bonds Day Close (bp)
2YR 6.44 6.37 (6.76) Anup Kumar (Fixed Income Analyst)
5YR 6.51 6.52 1.27 (62) 21 2922 8888 ext 29692
10YR 6.97 6.95 (2.04) akumar@maybank.co.id
15YR 7.23 7.27 3.97
20YR 7.50 7.49 (0.98)
30YR 7.46 7.46 (0.03) Myrdal Gunarto (Economist)
* Source: IBPA, Bloomberg, Maybank Indonesia (62) 21 2922 8888 ext 29695
MGunarto@maybank.co.id
May 7, 2018 12
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Total 3,829
Sources: BPAM
May 7, 2018 14
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Total 462
Sources: BPAM
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Published by:
Se Tho Mun Yi
Fixed Income Analyst
munyi.st@maybank-ib.com
(+60) 3 2074 7606
May 7, 2018 17