Ringgit Weekly Outlook - 24 May 2024

Choppy trading expected ahead of US core PCE; geopolitical tensions pose downside risks

The ringgit stabilised around the 4.68 - 4.70 level against the greenback as the USD index (DXY) remained below the 105.0 level due to a lack of catalyst. However, a more hawkish tone than anticipated in the FOMC minutes, which mentioned a "lack of further progress" in efforts to bring inflation toward the 2.0% target, pushed the DXY back to around the 105.1 level on May 23. This movement weakened the ringgit to above the 4.70/USD level. Additionally, the DXY found support from the prospect of policy divergence between the Fed and G10 central banks, stemming from ECB President Lagarde's endorsement of a June rate cut and Canada's softer-than-expected inflation reading.