14 Apr 2014
Asia EM Express: Singapore's central bank keeps policy unchanged at April meeting
FXStreet (Łódź) - As widely expected the Monetary Authority of Singapore (MAS) kept monetary policy unchanged at their April meeting, declaring the willingness to continue with the “modest and gradual” appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, with no changes to the slope, width or level of the policy band.
According to the official release: “The policy stance is assessed to be appropriate for containing domestic and imported sources of inflation, and ensuring medium-term price stability as a basis for sustainable growth.”
The decision was announced as Singapore's preliminary GDP data for the first quarter of the year showed merely 0.1% growth on a quarterly basis, hurt by a slowdown in manufacturing and a contraction in the services sectors.
The MAS also lowered their headline 2014 CPI inflation forecast to 1.5-2.5% from 2.0-3.0%, maintaining the core CPI projection at 2.0-3.0%.
"Barring a significant shock in the external environment, the Singapore economy should expand at a moderate pace over the course of the year. Wage pressures will persist and firms are likely to pass on business costs to consumer prices. Consequently, MAS Core Inflation is expected to stay elevated," the central bank said.
“Given positive growth expectations and elevated core inflation, our current baseline view is for no FX policy change through the rest of the year,” the The Nomura research analysts team state. “This should mean trading/building on S$NEER positions around the range of the mid-point (establishing long S$NEER positions) to around +100bp (establishing short S$NEER positions).”
Economic data
India's trade balance data released on Friday showed a widening of deficit from USD -8.13B in February to USD-10.51B in March, according to data released by the Ministry of Statistics and Programme Implementation. Analysts expected the deficit to narrow to USD -5.90B. Indian Exports rose to USD 29.58B from USD 25.96B and Imports increased to USD 40.09B from USD 33.82B.
Indian February Industrial Production dropped 1.9%, following a 0.1% increase the previous month. Manufacturing Output declined 3.7%, down from the 1.6% fall.
On Sunday Singapore informed that first quarter GDP growth slowed to 5.1% year-on-year, following +5.5%, as expected. On a quarterly basis GDP ticked up only 0.1%, after rising 6.1%, in line with forecasts.
Prakash Sakpal from ING comments: “Backing out Jan-Feb industrial production growth from the first quarter manufacturing GDP growth implies strong sequential March IP growth, 8.1% MoM SA (data due April 25). March non-oil domestic exports data due Thursday, April 17, will test this estimate. “
Technicals
The Singapore dollar slid on Monday on the MAS's lower 2014 inflation forecast.
The USD/SGD grew by 0.28% to 1.2518. The daily FXStreet Trend Index was slightly bearish, and the OB/OS Index neutral. RSI was at 34 at the last close and has risen to 59 so far today. The Daily 2-StDev Volatility Bandwidth was expanding at 340, with ATR (14) expanding at 55. The 1D 200 SMA was at 1.2615, while the 1D 20 EMA was at 1.2591.
According to the official release: “The policy stance is assessed to be appropriate for containing domestic and imported sources of inflation, and ensuring medium-term price stability as a basis for sustainable growth.”
The decision was announced as Singapore's preliminary GDP data for the first quarter of the year showed merely 0.1% growth on a quarterly basis, hurt by a slowdown in manufacturing and a contraction in the services sectors.
The MAS also lowered their headline 2014 CPI inflation forecast to 1.5-2.5% from 2.0-3.0%, maintaining the core CPI projection at 2.0-3.0%.
"Barring a significant shock in the external environment, the Singapore economy should expand at a moderate pace over the course of the year. Wage pressures will persist and firms are likely to pass on business costs to consumer prices. Consequently, MAS Core Inflation is expected to stay elevated," the central bank said.
“Given positive growth expectations and elevated core inflation, our current baseline view is for no FX policy change through the rest of the year,” the The Nomura research analysts team state. “This should mean trading/building on S$NEER positions around the range of the mid-point (establishing long S$NEER positions) to around +100bp (establishing short S$NEER positions).”
Economic data
India's trade balance data released on Friday showed a widening of deficit from USD -8.13B in February to USD-10.51B in March, according to data released by the Ministry of Statistics and Programme Implementation. Analysts expected the deficit to narrow to USD -5.90B. Indian Exports rose to USD 29.58B from USD 25.96B and Imports increased to USD 40.09B from USD 33.82B.
Indian February Industrial Production dropped 1.9%, following a 0.1% increase the previous month. Manufacturing Output declined 3.7%, down from the 1.6% fall.
On Sunday Singapore informed that first quarter GDP growth slowed to 5.1% year-on-year, following +5.5%, as expected. On a quarterly basis GDP ticked up only 0.1%, after rising 6.1%, in line with forecasts.
Prakash Sakpal from ING comments: “Backing out Jan-Feb industrial production growth from the first quarter manufacturing GDP growth implies strong sequential March IP growth, 8.1% MoM SA (data due April 25). March non-oil domestic exports data due Thursday, April 17, will test this estimate. “
Technicals
The Singapore dollar slid on Monday on the MAS's lower 2014 inflation forecast.
The USD/SGD grew by 0.28% to 1.2518. The daily FXStreet Trend Index was slightly bearish, and the OB/OS Index neutral. RSI was at 34 at the last close and has risen to 59 so far today. The Daily 2-StDev Volatility Bandwidth was expanding at 340, with ATR (14) expanding at 55. The 1D 200 SMA was at 1.2615, while the 1D 20 EMA was at 1.2591.