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14 Oct 2015
SGD: MAS delivers only the token easing - ANZ
FXStreet (Delhi) – Research Team of ANZ Research, note that the Monetary Authority of Singapore (MAS) eased policy for the second time this year, but today’s move can be considered only a token easing.
Key Quotes
“The policy of a modest and gradual appreciation remains, with the slope reduced slightly. The width of the policy band and the level at which it is centred remain unchanged. We estimate that the new slope is 0.5%pa, down from the previous 1% pa.”
“MAS notes downside risks to the growth outlook, but expects core inflation to rise next year towards its historical average. We see a chance of further easing should the inflation profile undershoot MAS’s expectations.”
“Singapore narrowly averted a technical recession. However this does not detract from the weak growth prospects confronting the economy, with Singapore entrenched in an ongoing regional trade recession.”
“We downgrade our 2015 GDP growth forecast to 2.0% (from 2.3%) and core inflation to 0.5% (from 0.7%) in view of the slightly negative output gap.”
FX View
“We expect the S$NEER to continue trading within the lower half of the policy band, and look for the lower bound to be tested at some point as the market will look for prospects of further easing. Near-term however, USD/SGD could be vulnerable to further downside on position unwinds. Hence, we close our short SGD/PHP trade for a 0.9% loss and will look for an opportunity to go long USD/SGD at better levels.”
Rates View
“We expect 6m SOR to move towards 1.4-1.5% in the medium term. The pace of this up-move will be dependent on broad dollar strength until we get further cues from the Singapore domestic data, to shape up expectations of future MAS policy moves.”
Key Quotes
“The policy of a modest and gradual appreciation remains, with the slope reduced slightly. The width of the policy band and the level at which it is centred remain unchanged. We estimate that the new slope is 0.5%pa, down from the previous 1% pa.”
“MAS notes downside risks to the growth outlook, but expects core inflation to rise next year towards its historical average. We see a chance of further easing should the inflation profile undershoot MAS’s expectations.”
“Singapore narrowly averted a technical recession. However this does not detract from the weak growth prospects confronting the economy, with Singapore entrenched in an ongoing regional trade recession.”
“We downgrade our 2015 GDP growth forecast to 2.0% (from 2.3%) and core inflation to 0.5% (from 0.7%) in view of the slightly negative output gap.”
FX View
“We expect the S$NEER to continue trading within the lower half of the policy band, and look for the lower bound to be tested at some point as the market will look for prospects of further easing. Near-term however, USD/SGD could be vulnerable to further downside on position unwinds. Hence, we close our short SGD/PHP trade for a 0.9% loss and will look for an opportunity to go long USD/SGD at better levels.”
Rates View
“We expect 6m SOR to move towards 1.4-1.5% in the medium term. The pace of this up-move will be dependent on broad dollar strength until we get further cues from the Singapore domestic data, to shape up expectations of future MAS policy moves.”