Global Forex Market
THE US dollar fell due to the continuing US trade war jitters with China and the G7 nations as President Trump considers splitting the Nafta deals with Mexico and Canada following China’s offer to purchase US$70bil worth of US goods to ease tariff threats.
On the data front, the labour market improved with better-than-expected net jobs at 223,000 from 162,000 in April versus the consensus’ 189,000; May unemployment at 3.8%, the lowest since April 2000 from 3.9% in April and an estimated 3.9%; and wages, rising 0.3% month-on-month (m-o-m) from 0.1% m-o-m in April with a consensus of 0.2%, which further cemented a rate hike by the US Fed next week plus a narrower April US trade deficit to US$46.2bil from US$47.2bil in March and the consensus’ US$49bil. Over the week, the dollar slipped by 0.77% to 93.49.
Brent crude oil rose 0.7% to close at US$77.32 per barrel amid supply jitters in Iran and Venezuela though the EIA announced that the US oil production jumped to a record high of 10.47mil bpd in March and the Baker Hughes oil rig count increasing to 861.
The euro gained 1.21% to 1.18 as the European Central Bank is set to discuss exiting its quantitative easing during the next policy meeting on June 14. Also, the political tension in Italy has eased with Italian Prime Minister Giuseppe Conte outlining policy priorities in addressing immigration and universal income. At the same time, the EU’s 1Q18 GDP fell in line with expectation at 0.4% quarter-on-quarter (q-o-q) from 0.7% q-o-q in 4Q2017.
The pound strengthened by 0.58% to 1.342 for the week on the back of positive economic release. The data includes May’s UK Market/CIPS Manufacturing PMI & Services PMI which accelerated better than expected to 54.4 and 54.0 from 53.9 and 52.8 respectively in April with the consensus 53.5 and 53.0 along with May’s Halifax HPI which was reported at 1.5% m-o-m, beating expectation of 1% m-o-m from April’s -3.1% m-o-m.
The yen’s demand dwindled as the Bank of Japan is firm that it will not withdraw the Japanese government bonds’ massive stimulus until inflation reaches the 2% target besides looking forward to the US-North Korea summit next week. Meanwhile, economic release includes April’s household spending which fell to -1.3% y-o-y against -0.7% y-o-y in April following May’s Nikkei Services PMI drop to 51 versus 52.5 in April. At the end of the week, the yen has lost 0.15% to 109.7.
The performance of the majority of Asia ex-Japan currencies was better this week except for the India rupee and Hong Kong dollar. The Korean won came out as the best performer for the week, rising by 0.56% to 1069 as political tension eases between US and North Korea, and investors are looking forward to the US-North Korea summit next week on June 12.
Meanwhile, the Indian rupee depreciated 0.1% amid the Reserve Bank of India (RBI) raising its benchmark interest rate to 6.25%, first time since December 2013.
The ringgit strengthened by 0.05% to 3.977 against the weaker greenback. Meanwhile, the FBM KLCI climbed 1.7% to 1,785.81. However, foreign selling pressure persisted, causing the equity market to register a net foreign outflow of RM605mil.
This week’s economic release includes April’s trade balance which posted a surplus of RM13.1bil, narrower than the RM14.7bil in March due to significant growth in imports of 9.1% y-o-y (previous: -9.6% y-o-y). Furthermore, May’s Nikkei Manufacturing PMI has eased to 47.6 from the 48.6 in April.