Gold Set for Seventh Weekly Gain as Trade War Risks Lift Demand

Malaysia ended 2024 on a roll: its economy grew faster than official forecasts, its currency was the best performer in emerging markets and, after an extended period of political turmoil, its government stayed intact for a second full year.

Sustaining that momentum is a priority for Prime Minister Datuk Seri Anwar Ibrahim, but the challenges to that vision are quickly piling up.

For starters, US President Donald Trump’s early moves to boost tariffs has Malaysian businesses bracing for inflationary pressures at home and abroad. That’s a global worry, but the hit that tariffs are expected to deliver to Malaysia’s exports — and growth — could quickly undermine Anwar’s plans to reduce the deficit by slashing subsidies for things like gasoline.

“It will be a challenging year ahead for most economies, especially small, export-oriented ones like Malaysia, facing both growth downsides and inflationary pressures,” said Adib Zalkapli, the founder of Viewfinder Global Affairs, a regional geopolitical consultancy.

Malaysia’s final report on gross domestic product released Friday showed the economy expanded 5.1% last year, and 5% in the final three months of 2024, driven mainly by domestic demand, according to the nation’s central bank. That’s below the 5.3% expansion in July to September, marking a second straight quarter of slower growth. Now headwinds from Trump’s election are set to build.

It wasn’t supposed to be this way. Well positioned along one of the world’s busiest waterways for trade, Malaysia has capitalised on the global shift of supply chains away from China. The US$400 billion (RM1.7 trillion) economy has long welcomed technology companies including Intel Corp, but in recent years it’s seen an influx of investment for things like data centres and chip manufacturing that have helped make it a world leader.

Late last year, Anwar and Singapore Prime Minister Lawrence Wong presided over a ceremony cementing the establishment of a special economic zone linking their two nations’ border region that is meant to help accelerate investments. The momentum from all that good news helped the ringgit strengthen 2.7% against the dollar while nearly all other emerging market currencies declined.

Anwar has acknowledged the challenges ahead and argued that Malaysia can sustain its growth rate and keep inflation manageable even with the threat of a potential trade war. He vowed this month to aggressively explore trade opportunities with other countries, including in Africa and Latin America.

“Going forward, while the global environment could be challenging, growth of the Malaysian economy will be driven by robust expansion in investment activity, resilient household spending and expansion in exports supported by Malaysia’s strong economic fundamentals,” BNM governor Datuk Seri Abdul Rasheed Ghaffour said in a statement on Friday.

But for now, the country’s main manufacturing association is warning that tougher times lie ahead. On Thursday Trump ordered his administration to consider imposing reciprocal tariffs on numerous trading partners, with a global review due in April.

In Malaysia, the removal of fuel and energy subsidies, coupled with rising tariffs and supply chain disruptions could “raise operational costs and erode consumer purchasing power,” the Federation of Malaysian Manufacturers said in a statement to Bloomberg.

Anwar has long planned to cut fuel subsidies starting mid-year in an effort to save as much as RM8 billion, easing the fiscal deficit. His government removed blanket diesel subsidies last year. Electricity tariffs are also expected to be raised later this year.

Yet the gloomier global outlook — combined with a key state election in Malaysia — may pressure Anwar to delay full implementation of that proposal.

It’s not just the big manufacturers who are worried.

Smaller businesses also have a “very challenging” outlook, although they are more concerned with cost pressures at home rather than the impacts of Trump’s presidency, according to Chin See Seong, the president of SME Association of Malaysia — the body representing small and medium-sized enterprises.

If there is a bright spot, it’s that Trump has a slew of bigger targets on his list. Malaysia’s US$26 billion trade surplus with the US puts it at risk, but that’s far less than other Asian nations including Vietnam, South Korea and India. And Malaysia has the benefit of continuing to look like a relatively affordable alternative to China — whose nearly US$300 billion surplus with the US put it at the top of Trump’s list — as supply chains continue to shift.

“Companies trying to better manage the US tariff impacts on China and potentially on other Southeast Asian countries may invest in more value-added activities in Malaysia,” Adib said.Uploaded by Magessan Varatharaja

Source: Theedgemarkets

Source：Dow Jones Newswires

A lease sign is seen in this photo taken from a commercial district in Seoul, Jan. 8. The government report said the Korean economy is under growing downward pressure, Feb. 14. 

The Korean economy faces "increasing downward pressure" due to heightened uncertainties both domestically and globally, leading to weakened economic sentiment amid a slowdown in domestic demand recovery and employment, the finance ministry said Friday.

In its monthly economic report, the Green Book, the Ministry of Economy and Finance cited downward pressure for the third consecutive month, attributing it to domestic political uncertainties and an escalating global trade war fueled by U.S. tariff plans.

"The global economy continues to face geopolitical risks, with growing trade uncertainty due to the implementation of major tariff measures," the report said. Since taking office last month, U.S. President Donald Trump has escalated tariffs on key trading partners.

The latest assessment builds on the December report, where the ministry first highlighted downward pressure following President Yoon Suk Yeol's brief declaration of martial law Dec. 3.

In November, the ministry had already softened its language, shifting its outlook from "recovery" to "gradual recovery."

The government plans to mobilize all available resources to swiftly implement measures aimed at job creation, financial support for low-income households and assistance for small businesses, the report said.

Additionally, the government has vowed to actively respond to trade uncertainties, including supporting domestic companies affected by the latest U.S. tariff plan, it noted.

Korea added 135,000 jobs in January, marking a turnaround from an on-year decline in the previous month, according to the report.

Consumer prices, a key gauge of inflation, grew 2.2 percent from a year earlier in January, marking the largest on-year increase since July, largely due to a weak local currency that pushed up import prices.

In December, Korea's industrial output rose 2.3 percent from the previous month on strong demand for semiconductors and automobiles. The on-month gain followed three consecutive months of decline.

Facility investment rose 9.9 percent from the previous month in December, continuing an overall upward trend.

Source: Koreatimes

USD/CAD may test immediate support at the lower threshold of the falling wedge at 1.4160.

The daily chart technical analysis shows a falling wedge pattern, signaling a potential upward correction.

The primary resistance appears at the nine-day EMA of 1.4278.

The USD/CAD pair continues its losing streak for the fourth successive session, trading around 1.4190 during the Asian hours on Friday. The daily chart's technical analysis shows a falling wedge pattern, which is a bullish chart pattern that signals a potential breakout to the upside.

Additionally, the 14-day Relative Strength Index (RSI) is approaching the 30 level, reinforcing the prevailing bearish outlook. However, a drop below 30 would indicate an oversold condition for the USD/CAD pair, potentially signaling an upcoming upward correction.

However, the USD/CAD pair continues to trade below the nine- and 14-day Exponential Moving Averages (EMAs), highlighting persistent bearish sentiment and weak short-term price action. This positioning still suggests sustained selling pressure.

On the downside, the USD/CAD pair could find its immediate support at the lower threshold of the falling wedge at 1.4160, followed by the psychological level of 1.4100.

The USD/CAD pair may find immediate resistance around the nine-day EMA at 1.4278, followed by the 14-day EMA at 1.4307. A breakout above these levels may strengthen short-term momentum and support the pair to test the upper boundary of the falling wedge at the 1.4330 level.

USD/CAD: Daily Chart

Source: FXSTREET