Domestically, Singapore’s inflation has eased from a peak of 7.5% YoY in August 2022 to 4.0% YoY in August 2023 but remains higher than pre-covid levels. Upside risks remain from food and energy prices, as well as the GST increase to 9% effective next year. On the growth front, Singapore narrowly escaped a recession after Q2 GDP growth printed +0.1% QoQ after a decline of 0.4% in Q1. But recent PMI and retail sales have surprised to the upside and a services led recovery continues amid post-covid rise in inbound tourism. Manufacturing sector however continues to pose headwinds, together with weakening global growth outlook, which suggests that the next MAS move will likely be that of easing, but it may be too early to get any signals on that yet given the next MAS meeting is in April 2024.
USDSGD has traded higher to 1.3764 amid the strength of the US dollar and the spillovers from a weak yuan. SGD is likely to remain weak as long as the USD strength continues, but a recovery may ensue later this year or next year particularly if China’s stimulus actions bring a recovery in economic momentum. If the MAS stays on hold, SGD should stay supported by room for appreciation is limited as SGD NEER is trading close to the upper band. Technicals suggest USDSGD could rise to 61.8% retracement at 1.3934 before dollar loses steam but a recovery in SGD may ensue if the long dollar positioning starts to be challenged.
Market Takeaway: Limited room for SGD to rally on a hold decision from the MAS as SGD NEER trades near the top of the range.