Global Forex Market

US dollar came in as the best performer for the week, posting gains for six consecutive days. It appreciated by 0.68% to 96.568.

The dollar was largely supported by favourable data such as the labour market, which showed the economy added 304,000 jobs in January from 222,000 in December 2018 despite the unemployment rate edged slightly higher to 4% from 3.9% in December 2018 due to the longest period of government shutdown.

Meanwhile, wage growth rose 3.1% year-on-year (y-o-y) in January from 3.2% y-o-y in December 2018. Adding on, January’s ISM Manufacturing PMI gained 56.6 points from 54.3 points in December 2018, suggesting business activities remain healthy.

Later during the week, the dollar received further impetus after investors were seen flocking safe assets as optimism on trade talks falters.

This week’s events include US President Donald Trump, on one hand, giving an upbeat assessment on the economy during his State of the Union speech, though he urged Congress to provide funding for the border wall.

On the other hand, US Federal Reserve chairman Jerome Powell gave a brief positive assessment on the economy, saying it is currently in a good place with low unemployment.

On the commodity space, the Brent crude oil gave up its gains, falling 1.41% to US$61.6 per barrel by the end of the week. The sharp decline in crude prices was seen at the end of the week following news on weaker global outlook, added with a pick up in crude inventories:

(1) Energy Information Administration crude stock added 1.263 million barrels as of Feb 1 compared to 919,000 barrels in the week prior; and

(2) American Petroleum Institute crude oil inventories added 2.514 million barrels as of Feb 1 from 2.098 million barrels in the week prior.

The euro depreciated by 0.85% following a slew of disappointing economic release which includes:

(1) Germany’s factory order that fell by 1.6% month-on-month (m-om) in December from a decline of 0.2% m-o-m in November;

(2) EU January Markit Composite PMI eased lower to 51.0 points from 51.1 points in December; and

(3) Germany’s Markit Manufacturing PMI contracted to 49.7 points in January from 51.5 points in December – the demarcation is 50.

Later during the week, euro was dragged down again after the European Commission cut EU’s GDP growth to 1.3% in 2019 from 1.9% in 2018, as policymakers expect the current global trade tensions and growing public debt to continue pose headwinds to growth.

Similarly, the pound depreciated by 0.65% to 1.295 following a slew of negative headlines:

(1) disappointing Nikkei Manufacturing PMI data for January, coming in at 50.3 points from 52.6 points in December 2018 (consensus: 53.5); and

(2) UK Prime Minister Theresa May enters into the crunch of Brexit talks in an attempt to find a solution on the Irish backstop proposal.

However, the pound managed to cap losses as market remains positive on the ongoing Brexit deal, overshadowing news on Bank of England’s decision to keep interest rate unchanged at 0.75% as expected. During the meeting, policymakers slashed 2019 GDP forecast to 1.2%, the slowest since 2008 global financial crisis.

The Japanese yen pared losses to end the week on a stronger note, up 0.06% to 109.8 as demand for safe papers returned owing to risk-off environment. Meanwhile, data release were a rather mixed:

(1) December unemployment rate edged lower to 2.4% from 2.5% in November;

(2) Jobs-to-application ratio held steady at 1.63 as at December; and

(3) Nikkei Manufacturing PMI fell into the contractionary region to 49.9 points from 51.2 points – the demarcation is 50.

The majority of Asian ex-Japan currencies weakened against the greenback save for the Indian rupee, Thai baht and Philippine peso.

The Indian rupee strengthened by 0.49% to 71.5 after Reserve Bank of India instituted a surprise cut on its benchmark interest rate by 25 basis points (bps) to 6.25% while shifted its shifted its stance to “neutral” from “calibrated tightening” in order to support the slowing economy with a low inflation.

Meanwhile, both baht and peso strengthened by 0.19% to 31.2 and 0.34% to 52.2, respectively, amid both its central bank kept interest unchanged as expected.

However, South Korea came as the worst performer in the region, falling 0.30% to 1,124.1 amid a short working week in conjunction with Seollal holiday.

Despite a short working week in conjunction with the Chinese New Year holiday, ringgit came as the best performer in the region, posting a gain of 0.53% to 4.072. Besides, the local bourse closed 0.6% higher to 1,693 with a net foreign inflow of RM139mil.

On the data front, economic release includes Nikkei PMI edged higher to 47.9 points from 46.8 points in December.