US markets calm before the storm
US sharemarkets were higher and the US dollar was lower as global markets approached today’s critical US election results in a relatively calm manner.
The US’s Dow Jones was up 1.0%, the S&P 500 up 1.2%, while the Nasdaq gained 1.3%.
The USD was mostly weaker with the USD index falling to the lowest level since 15 October.
The Aussie was the best performer after yesterday’s Reserve Bank of Australia decision. The AUD/USD gained 0.7%.
The first state-wide polls close at 7.00pm EST (11.00am AEDT) in Virginia, Vermont, South Carolina, Kentucky, Indiana and the critical swing state of Georgia.
RBA kicks-off central banks with “hawkish hold”
The Aussie was boosted by yesterday’s RBA decision in which the central bank gave little evidence it might cut rates in the near term.
The RBA warned on both the strong employment market and ongoing government spending that is keeping the pressure on inflation.
Financial markets now do not see an RBA rate cut until May 2025.
From here, the Bank of England meets on Thursday night and the Federal Reserve on Friday morning (AEDT).
Ringgit steadies as BNM holds neutral stance
Coming up, the Malaysian Bank Negara will release its policy rate decision today.
As in previous meetings, we anticipate that BNM will retain its neutral position and leave its policy rate at 3%, reasoning that the present monetary posture is still supportive of the economy and that the outlook for inflation and growth is generally consistent with its most recent assessment.
We continue to believe that BNM will deem monetary accommodation unnecessary in light of the strong and wide-ranging GDP growth in Q3 and some upside risks to inflation from more fuel subsidy reduction, as directed in the 2025 budget.
Furthermore, BNM is expected to recognize the dangers of foreign exchange volatility in the face of external uncertainties, especially the US election, but it will also continue to point to core fundamentals like economic outperformance and its policies that encourage GLCs to repatriate their foreign exchange earnings.
From technical standpoint, USD/MYR looks overbought on RSI indicator, and may slightly weaken. The next support line rests at 50 day moving average of 4.3334, which USD buyers may be keen to take advantage given our medium-term positive view on USD.
As per below, the USD/MYR regressed on the rate differential of US-MY, which may potentially be more positive for USD/MYR.
USD weaker ahead of election results
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 4 – 9 November
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
