Forex watch: Global markets to awake from its slumber?

The upward momentum seen in global markets appears to have waned, with various asset classes being kept to sideway ranges, including US equities, gold, and Asian currencies.

US dollar-ringgit was confined to a tight range of between 4.26 and 4.28, guided along by its 100-day simple moving average, with Asian currencies putting in a mixed performance against the greenback for the period.

Global investors have been caught between competing narratives, comparing the risks of a second wave against the optimism surrounding the post-pandemic, stimulus-fuelled recovery.

The rally in US stocks appears to have tired, but could be jolted by Friday’s (June 19) ‘quadruple witching’, with the June 26 reconstitution of Russell indexes also looming.

These events could trigger a surge in volumes and result in a major move either way for US equities, with global stocks potentially following suit.

Investors will also continue monitoring the state of the global economy, with key US economic data due over the coming week, along with the IMF’s revised 2020 growth projections.

Until there is greater clarity on the outlook of the global economy, fundamental-focused investors are likely to continue treading water, unless jolted by a major risk event.

On Wednesday, Malaysia’s May CPI reading is expected to come in at minus 2.7 per cent, which would mark three consecutive months of deflation. Barring a sustained surge in oil prices in the second half of 2020, the headline CPI print is likely to keep to the central bank’s range of negative 1.5 to 0.5 per cent for the year.

For the week ahead, US dollar-ringgit could again be limited to a tight range, barring a significant swing in global risk sentiment.

Should the US dollar continue paring losses seen in the first half of June, that may guide US dollar-ringgit closer towards the 4.30 psychological level.

However, a meaningful bout of risk-on mood in global markets could see the ringgit strengthen below the 4.25 level against the greenback.

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Lim Li Yin

Lim Li Yin

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