MYR Under Pressure But Tariff Deal Offers Glimmer Of Hope
Initial market optimism stemming from a recent US-EU trade deal proved short-lived. Investors quickly recalibrated their expectations, concluding that broad-based tariffs would continue to exert pressure on global trade, prompting a flight to the safety of the US Dollar and pushing the DXY higher.
Concerns over the US employment landscape were briefly sparked by weaker-than-expected Job Openings and Labor Turnover Survey (JOLTS) data for June, which showed a decline to 7.43 million job openings against a forecast of 7.55 million. However, these fears were largely offset by robust July ADP private payroll figures, which surprisingly rose by 104,000 against a forecast of 77,000, and a stronger-than-expected US GDP growth of 3.0% in the second quarter of 2025. Adding to the dollar's resilience, the Federal Reserve (Fed) maintained a hawkish stance, firmly resisting political pressure for immediate interest rate cuts.
Looking ahead, the macro calendar for the coming week is relatively light. Market attention remains firmly fixed on tonight's crucial US labor report. Consensus forecasts anticipate non-farm payrolls to come in at 104,000 and the unemployment rate at 4.2%.
Kenanga Research noted that a potential silver lining for the Ringgit emerged from recent trade developments, with Malaysia successfully securing a reduced tariff rate of 19.0% from the previous 25.0%. This positive outcome is expected to bolster Malaysian equities and attract modest foreign inflows, providing some much-needed support for the Ringgit.
Following the hawkish Federal Open Market Committee (FOMC) meeting, markets are now pricing in just a single rate cut this year. A weaker-than-expected US labor print, however, could trigger a 'dovish USD repricing' and potentially lift risk assets. The easing of tariff uncertainties is also expected to support Malaysia's growth outlook, helping to anchor the Ringgit near 4.25/USD in the week ahead.
Technically, the USD/MYR pair is anticipated to hover near its 5-day Exponential Moving Average (EMA) of 4.26. With the pair approaching overbought territory, a short-term correction is plausible, with immediate support identified at 4.25. Related
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The Star
44 minutes ago
- The Star
The US can survive tariffs. That doesn't mean they're worth it
ON hearing of the Continental Army's pivotal victory at the Battle of Saratoga in 1777, John Sinclair told Adam Smith, 'The British nation must be ruined'. As Sinclair recalled, the author of The Wealth of Nations (published the year before) urged him to calm down. 'Be assured, my young friend, there is a great deal of ruin in a nation.' Dedicated though he was to the benefits of free trade, Smith would doubtless say the same about today's turn toward mercantilism in the United States. It's a blow, but not the end of the world. That's worth noting: Catastrophism, a popular mode of discourse these days, is usually unhelpful. But champions of President Donald Trump's approach to trade are apt to make the opposite mistake – namely, thinking that if the roof hasn't fallen in, the policy must be succeeding. If it results in slower growth and persistent under-performance, that might not be 'ruin', but it sure isn't victory. Once Trump's new system of tariffs has settled down – if it ever does – what might it cost? What might 'less than ruin' amount to? According to most estimates, the direct economic losses are certainly tolerable, especially for a huge and relatively closed economy like the US. One recent study explores the upper limit on what's at stake by calculating the benefits of liberal trade compared with no trade at all. For the US, the costs of closing the economy altogether would fall in the range of 2% to 8% of GDP. The costs of less trade, as opposed to no trade, would naturally be smaller still. Earlier this month the US Federal Reserve published a research note on the effects of specific tariffs. Its economists modelled an increase of 60 percentage points in the US tariff on imports from China, with and without a 'baseline' tariff of 10% on other trading partners, assuming for one set of scenarios that the trade deficit is unchanged and for another that it shrinks. According to their model, the 60% extra tariff on China, the 10% baseline tariff on everybody else, plus a 25% reduction in the trade deficit would cut US GDP by a little under 3%. (China's losses would be about the same; thanks to shifts in the pattern of trade, the rest of the world would come out about even.) These and other such studies reveal the complexity of the changes caused by trade barriers. For example, surely tariffs would reduce imports and hence shrink the trade deficit. Why assume, as some of the Fed's scenarios do, that the deficit doesn't change? Actually, it's far from obvious that the trade deficit will narrow. You'd expect a smaller trade deficit to make the dollar appreciate – in due course increasing imports, cutting exports, and undoing the initial effect. In any case, the overall external balance is determined by the gap between its saving and investment, which tariffs affect only indirectly. Or consider the surprisingly small estimated cost of closing the economy completely. One of the assumptions behind the estimated losses of 2% to 8% of GDP is that the ease of replacing domestic goods with imports – the so-called elasticity of substitution – can be estimated from current trade data. But as the economy approaches autarky (self-sufficiency), this elasticity might fall abruptly as certain critical foreign products prove difficult or impossible to replace. The costs of abolishing imports might then be much bigger than projected. (Granted, a rational mercantilist would be careful not to press too far: An entirely closed economy isn't the goal.) The list of other complications is endless. What's the effect of trade on competition and innovation? It depends. Up to a point, competition through trade is likely to spur innovation, but if foreign competition is severe enough to shut a domestic industry down, said industry won't be more innovative. The dynamic effects of trade – that is, the effects of trade on growth – are even harder to estimate than the static effects captured in the studies mentioned above. Amid all the uncertainty, two points seem worth emphasising. First, despite the complexities, economists generally agree that trade does deliver net gains – that, on this, Adam Smith was right. If suppressing trade is costly, then exactly how costly is not the most important question. You don't do it. To be sure, the US has a huge domestic market and is richly endowed with natural resources. These advantages mean that trade is likely to deliver smaller gains than it does for other economies. But, to repeat, small gains are better than none. Second, the costs of the new mercantilism aren't confined to the implications for GDP of moving from a settled regime of liberal trade to a settled regime of managed trade. That shift involves massive economic and geopolitical dislocations, which are likely to be costly in themselves. Economic restructuring expends resources; it creates jobs and destroys them. The 'China Shock' was disruptive – but vainly trying to reverse it will be disruptive all over again. In the first case, there were aggregate benefits; in the second, there'll be aggregate losses. Geopolitical dislocation could involve the biggest costs of all. The new mercantilism puts US-led alliances and multilateral institutions under enormous strain. The view that the US has been exploited by these arrangements isn't unwarranted – there's been some free-riding, no doubt – but on balance US global leadership has been an exercise in enlightened self-interest. Dismantling the global trading order, and casting this as overdue retaliation against selfish so-called friends, is to cast away American power. It would be bad policy if undertaken in return for small economic gains. In return for substantial, even if less-than-ruinous, economic losses, it's insane. — Bloomberg Opinion/Tribune News Service Clive Crook is a Bloomberg Opinion columnist and member of the editorial board covering economics.
Free Malaysia Today
11 hours ago
- Free Malaysia Today
Stocks cheer Trump's trade deals after EU agreement
Europe accepted the 15% US tariff as better than the threatened 30%, though it fell short of hopes for zero tariffs. (EPA Images pic) SINGAPORE : Global stocks rose and the euro firmed on Monday after a trade agreement between the US and the EU lifted sentiment and provided clarity in a pivotal week headlined by the Federal Reserve and the Bank of Japan policy meetings. The US struck a framework trade agreement with the European Union, imposing a 15% import tariff on most EU goods – half the threatened rate, a week after agreeing to a trade deal with Japan that lowered tariffs on auto imports. Countries are scrambling to finalise trade deals ahead of the Aug 1 deadline, with talks between the US and China set for Monday in Stockholm amid expectation of another 90-day extension to the truce between the top two economies. 'A 15% tariff on European goods, forced purchases of US energy and military equipment and zero tariff retaliation by Europe, that's not negotiation, that's the art of the deal,' said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities. 'A big win for the US.' S&P 500 futures rose 0.4% and the Nasdaq futures gained 0.5% while the euro firmed across the board, rising against the dollar, sterling and yen. European futures surged nearly 1%. In Asia, Japan's Nikkei slipped after touching a one-year high last week while MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.27%, just shy of the almost four-year high it touched last week. While the baseline 15% tariff will still be seen by many in Europe as too high, compared with Europe's initial hopes to secure a zero-for-zero tariff deal, it is better than the threatened 30% rate. The deal with the EU provides clarity to companies and averts a bigger trade war between the two allies that account for almost a third of global trade. 'Putting it all together, what we've seen with Japan, with the EU, with the talks which are due to be held in Stockholm between the US and China, it really does negate the risk of a prolonged trade war,' said Tony Sycamore, market analyst at IG. 'The importance of the August tariff deadline has significantly been diffused.' The Australian dollar, often seen as a proxy for risk sentiment, was 0.12% higher at US$0.65725 in early trading, hovering around the near eight-month peak scaled last week. Fed, BOJ await In an action-packed week, investors will watch out for the monetary policy meetings from the Fed and the BOJ as well as the monthly US employment report and earnings reports from megacap companies Apple, Microsoft and Amazon. While the Fed and the BOJ are expected to stand pat on rates, comments from the officials will be crucial for investors to gauge the interest rate path. The trade deal with Japan has opened the door for the BOJ to raise rates again this year. Meanwhile, the Fed is likely to be cautious on any rate cuts as officials seek more data to determine if tariffs are worsening inflation before they ease rates further. But tensions between the White House and the central bank over monetary policy have heightened, with Trump repeatedly denouncing Fed chair Jerome Powell for not cutting rates. Two of the Fed Board's Trump appointees have articulated reasons for supporting a rate cut this month. ING economists expect December to be the likely starting point for rate cuts, but it 'may be a 50 basis point cut, if the evidence on weaker jobs and GDP growth becomes more apparent as we anticipate.' 'This would be a similar playbook to the Federal Reserve's actions in 2024, where it waited until it was completely comfortable to commit to a lower interest rate environment,' they said in a note.
Malay Mail
16 hours ago
- Malay Mail
Ringgit seen holding gains next week on softer Fed signals
KUALA LUMPUR, Aug 2 — The ringgit is expected to trade between 4.25 and 4.26 against the US dollar next week, following weaker-than-expected United States (US) Nonfarm Payrolls (NFP) data for July, which may prompt the US Federal Reserve (Fed) to consider an interest rate cut at its September meeting. The NFP data for July fell short of expectations to just 73,000 jobs, significantly below the consensus estimates of 106,000. Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the latest NFP data could boost sentiment for the ringgit, as it increases the expectations that the Fed may reduce the Federal Funds Rate in September. He also noted that NFP figures for the previous two months — May and June — were revised sharply lower, further reinforcing expectations of a potential rate cut. 'Such views were very much aligned with the two dissenters during the last Federal Open Market Committee (FOMC) meeting, which favoured a quarter-point cut. 'The outlook for Fed Fund Rate was the main consideration among the traders as the Fed was seen as indecisive on further monetary policy accommodation during the recent FOMC meeting,' he told Bernama. Meanwhile, Mohd Afzanizam said the US government's recent decision to impose a reciprocal tariff of 19 per cent on Malaysia-- down from a previous rate of 25 per cent-- could help mitigate the impact. 'This is a welcome move, and there may be room for further negotiations. An improved trade arrangement could prove positive for the ringgit over the medium term,' he added. Furthermore, he believes that the recently announced 13th Malaysia Plan (13th MP) will support the ringgit in the medium to long term. Under the plan, development expenditure has been increased to RM430 billion, which is expected to boost domestic demand and encourage investment activities, ultimately supporting Malaysia's gross domestic product growth. The 13th MP was tabled by Prime Minister Datuk Seri Anwar Ibrahim in Parliament on Thursday, with a focus on driving sustainable growth based on value creation across all sectors. On a Friday-to-Friday basis, the ringgit ended the week lower against the greenback, closing at 4.2750/2815 versus 4.2195/2245 previously. However, the local note traded higher against a basket of major currencies. The ringgit appreciated vis-à-vis the Japanese yen to 2.8407/8452 from 2.8529/8565 on Friday the previous week, rose versus the euro to 4.8752/8826 from 4.9507/9566 last week, and gained against the British pound to 5.6208/6293 from 5.6786/6853 previously. Against Asean currencies, the ringgit trended mostly higher. The local note firmed against the Singapore dollar to 3.2907/2960 from 3.2937/2978 at the end of last week, strengthened versus the Thai baht to 13.0058/0319 from 13.0268/0478, and improved against the Philippine peso to 7.35/7.36 from 7.38/7.40 in the preceding week. However, it edged lower versus the Indonesian rupiah to 258.8/259.4 from 258.5/258.9 in the previous week. — Bernama
