Ringgit Stable, Digests BNM Decision & Political Turmoil

Spot USD/MYR has stabilised after yesterday's rally, showing little reaction to the latest monetary policy decision from BNM. The rate last sits at MYR4.1820, little changed on the day, with bulls looking for a move through Jul 8/Aug 24, 2020 highs of MYR4.1830/40, before targeting Aug 11, 2020 high of MYR4.2065. Conversely, a fall through Jul 6 low of MYR4.1480 would give bears some reprieve.

• Bank Negara Malaysia left the OPR unchanged at 1.75%, in line with expectations of most analysts. The statement did not contain any major surprises, with policymakers still deeming the current monetary conditions "appropriate and accommodative."
• Central bankers showed no concern around "transitory" inflationary pressure, which are expected to abate later this year. BNM expect headline inflation to average closer to the lower end of its forecast range of +2.5%-4.0% Y/Y in 2021.
• In their post-decision comments, UOB and J.P. Morgan observed that BNM highlighted the increased "adaptability to remote work, automation and digitalisation," which could mitigate the adverse impact of the lockdown.
• Meanwhile, political uncertainty remains elevated after the collapse of the ruling coalition. PM Muhyiddin's Bersatu expressed support for its leader, noting that the split with UMNO "had no effect on the workings of government".
• Elsewhere, Dep PM Ismail Sabri announced that Sabah will move into Phase Two of the Natonal Recovery Plan on Saturday, after the state met all three virus-related criteria.
• Focus on the data front moves to Malaysia's industrial output & manufacturing sales, due next Monday.