Muhyiddin Poised To Resign, Markets Eye Heightened Political Uncertainty

Spot USD/MYR sits 10 pips above neutral levels, last at MYR4,2385, with focus on reports suggesting that PM Muhyiddin is planning to step down. Bulls need a clearance of Aug 11 & 12 highs at MYR4.2420, before targeting Jul 21 high of MYR4.2440. Conversely, a slide through Aug 5 low of MYR4.2105 would expose Jul 15 low of MYR4.1955.

• PM Muhyiddin reportedly told his Cabinet colleagues that he intended to submit his resignation letter to the King today. Muhyiddin could remain in office in caretaker capacity until lawmakers select his successor. Local media outlets noted that current Deputy PM Ismail Sabri is seeking to muster enough support to replace Muhyiddin.
• UMNO and Bersatu lawmakers were reportedly. seen gathering at the Royale Chulan Hotel to meet with Ismail Sabri. Elsewhere, Malaysiakini reported that UMNO Supreme Council were expected to convene to decide on the party's formal prime ministerial candidate.
• Resultant political uncertainty emerges at a time when Malaysia is battling the latest wave of Covid-19. Last Friday, Bank Negara Malaysia cited the outbreak when they slashed Malaysia's 2021 GDP forecast to +3.0%-4.0% Y/Y from +6.0%-7.5% projected previously.
• PM Muhyiddin announced Sunday that Malaysia will further relax restrictions for fully inoculated individuals, with looser curbs taking effect as soon as today. Meanwhile, Education Min Radzi announced the postponement of the resumption of in-person teaching at schools by a month to Oct 3.
• Looking ahead, Bank Negara Malaysia will release foreign reserves data on Friday.