At the outset of the week the Singapore Dollar (SGD) broadly strengthened in response to domestic inflation data.
The news that consumer prices fell again in February prompted investors to speculate that Singapore’s central bank will take action in April and lent the Singapore Dollar support.
While CPI rose by 0.1% on the month in February, this following a negatively revised figure of -0.2% in January and resulted in an annual reading of -0.3%.
Singapore’s central bank shocked industry experts in January by holding an unscheduled meeting and easing fiscal conditions. Whether or not the latest inflation numbers could prompt more action from the central bank is currently dividing analysts.
According to UBO; ‘We expect the Monetary Authority of Singapore to maintain their current monetary stance of a ‘modest and gradual appreciation’ of the Singapore Dollar nominal effective exchange rate unchanged at our estimated 1.0% per annum rate in the next policy meeting in April. However, we do anticipate that the MAS may effect a one-off downward re-centering of the SGD NEER midpoint as the SGD NEER has been trading close to the minus 2% band in recent weeks since the last off-policy decision surprise.’
The US Dollar to Singapore Dollar (USD/SGD) exchange rate fell to a low of 1.3603 before rebounding to 1.3698 following the publication of above-forecast US inflation and manufacturing data.
The Pound Sterling to Singapore Dollar (GBP/SGD) exchange rate, meanwhile, eased from the day’s high of 2.0459 to a low of 2.0303 as the rate of inflation in the UK slowed to 0.0% – the lowest figure since records began in 1989.
The UK’s Consumer Price Index for February ups the odds of the gauge moving into negative territory next month and makes a Bank of England (BoE) rate hike taking place this year even less likely.
As the week progresses further Singapore Dollar (SGD) movement could be caused by Singapore’s Industrial Production data for February. The level of industrial production in the nation is forecast to have increased by 0.3% on the month in February, resulting in an annual figure of -4.5%.
Next week domestic ecostats to be aware of include the nation’s Bank Lending number and the SIPMM Manufacturing PMI for March.
In February the gauge of Singapore’s manufacturing sector came in at 49.7. Economists have predicted that the index climbed back above the 50 mark separating growth from contraction in March and printed at 50.35.