Pound Sterling Singapore Dollar (GBP/SGD) Exchange Rate Muted on Weakest Singapore Inflation Since 2010
The Pound Sterling Singapore Dollar (GBP/SGD) exchange rate remained flat, leaving the pairing trading at around S$1.7947.
The Singapore Dollar remained under pressure today after the latest data revealed Singapore’s core inflation gauge tumbled to its lowest level in more than a decade.
July’s official data revealed soft consumer spending due to the coronavirus pandemic and a slump in energy prices sent inflation lower.
The measure that is closely watched by the country’s central bank slumped to -0.4%, its lowest level since January 2010.
This weighed on SGD, and with authorities battling with the country’s deepest-ever recession, many expect core and headline inflation to average between -1% and 0% this year.
OCBC Bank’s head of treasury research and strategy Selena Ling said that reflationary pressures are unlikely to re-emerge until 2021. Ling also noted:
‘Subdued consumer sentiments amid the soft labour market conditions, coupled with existing slack in the Singapore economy, should keep prices capped as firms find it difficult to pass on costs to end-consumers just yet.’
Pound (GBP) Flat on Lingering Brexit Worries
Sterling struggled at the start of this week on lingering worries about Brexit and the current stalemate in talks between the UK and bloc.
On Friday, negotiators from Britain and the European Union said that no real progress had been made during the latest round of talks. Both sides blamed each other for the lack of progress.
Although, Britain’s chief negotiator David Frost said a deal was ‘still possible’, but would not be easy to achieve.
He stated:
‘There are […] significant areas which remain to be resolved and even where there is a broad understanding between negotiators, there is a lot of detail to work through. Time is short for both sides.’
Although, due to the lack of clarity on Brexit negotiations, analysts believe that investors will turn their attention to the Bank of England (BoE). ING analysts noted that markets will be on the lookout for any signs the bank is willing to send rates below zero.
ING analyst wrote:
‘The collapse of Brexit negotiations has triggered a relatively contained correction in GBP.
‘And focus this week will turn to BoE speakers that may shed some light around a possible move into negative rates.’
Pound Singapore Dollar Outlook: Weak Industrial Production to Send SGD Lower
Looking ahead, the Singapore Dollar (SGD) could suffer losses against the Pound (GBP) following the release of Wednesday’s industrial production data.
If July’s industrial production slumps more than expected, it will weigh on the Singapore Dollar.
Meanwhile, Pound traders will be focused on speeches from Bank of England (BoE) policymakers. Although, if policymakers are overly dovish it will weigh on GBP sentiment. This will leave the Pound Singapore Dollar (GBP/SGD) exchange rate largely flat.