Inflation Steady But Ringgit Slips As Markets Digest Global Fiscal Signals

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INFLATION continued to run in line with expectations. Malaysia’s Statistics Department (DOSM) reported the April headline consumer price index (CPI) was at +1.4% year-on-year, or similar to the March pace.
Nevertheless, core CPI rose by a higher +2.0% in April vs. +1.9% the prior month. According to DOSM, core data was supported by prices of personal care goods, social protection, food and beverage (F&B), and restaurant and accommodation services.
“Dollar sentiment remained fragile and DXY remained below 100 at the close. Prior day dollar weakness owed to concerns over tax cuts blowing out US government debt in the coming years,” said AM Bank Group (AM) in a recent report.
However, some short-term volatility in the dollar was arrested as short-term clarity was aided by the House of Representatives passing Trump’s tax and spending bill.
Elsewhere, the EUR depreciated by about 0.4% overnight, pressured by mixed HCOB PMI data release.
Both EUR and GBP fell off amid the modest USD support, with GBP backing down from 2022 highs on the back of strong UK CPI released this week.
Meanwhile, CNY was under modest pressure, though only partly reversing the prior day’s gains, amid some USD support.
“We think the limited upside to CNY in the short term was after the PBOC rate cuts earlier this week,” said AM.
Ringgit weakened vs the US dollar yesterday as the greenback received some support during the Asian session.
“There was maybe a bit of caution leading up to the CPI release, and we think after the in-line April data came out and continued benign inflation outlook into the short- to medium-term horizon, provided little support for MYR rest of yesterday,” said AM.
The ringgit government bond market was bullish yesterday as MGS yields declined across the curve, supported by Malaysia’s inflation data, which met expectations at 1.4% year-on-year in April.
Meanwhile, the corporate bond market remained well-supported, with notable trades including AAA-rated Tenaga 06/37, which edged down 1 basis points to 3.74%, and AAA-rated JohorCorp 07/30, which fell 5 basis points to 3.61%.
Gold was supported by buying interest found early during the Asian session as global market sentiment remained pressured by the US fiscal-related headlines. Brent was down yesterday as caution remained regarding the larger OPEC+ supply. — Focus Malaysia

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