SINGAPORE: MAS Seen On Hold, But SGD NEER Away From Top End Of Policy Band
Tomorrow the MAS delivers its Oct policy meeting outcome. The broader market consensus is for no change, although some forecasters are calling for further easing. A Rtrs poll had 10 out of 14 analysts surveyed forecasting no change, while for BBG 16 out of 20 forecast no change. The resilient domestic growth backdrop is cited as a factor to stay on hold, along with easings already undertaken by the MAS (Jan and Apr of this year). It maintained a modestly positive SGD NEER slope. The bias in 2026 is for further easing though. Our bias is with no change, but it is likely to be a close call between the status quo and easing further.
- In terms of market pricing, we have seen some softness in the SGD NEER. The chart below plots the SGD against the upper and lower policy bands (per Goldman Sachs estimates). We are now around -0.90% from the top end of the band, which is still above cycle lows but we were around -0.60% from the top end of the band this time last month.
- We also get Q3 advanced GDP estimates tomorrow. The market expects 0.6%q/q growth after 1.4% in Q2. Measures of domestic activity have been holding up, but uncertainty rests with the external side. Our sense is the central bank is likely to wait until further evidence of weaker economic momentum before deciding to ease more. It does meet again in Jan 2026.
- From an inflation standpoint, pressures are quite modest and could provide further justification for easing (Core y/y at 0.3%, while headline is 0.5%). There doesn't appear to be a large disconnect though between SGD NEER y/y change and inflation trends.
- For USD/SGD, recent highs rest just short of the 200-day EMA (1.3015), which could be targeted on any dovish MAS surprise tomorrow. The 100-day EMA support point is back at 1.2910/15 (current spot is 1.2970).
Fig 1: Goldman Sachs SGD NEER Versus Upper & Lower Policy Bands
Source: Goldman Sachs/Bloomberg FInance L.P./MNI
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AUSSIE 3-YEAR TECHS: (U5) Bounces Further Off Support
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.550 @ 15:36 BST Sep 12
- SUP 1: 96.430/95.900 - Low Sep 3 / Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures are trading off recent lows. A resumption of gains from here would further narrow the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead strengthen a bearish threat. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would open 96.860, the Apr 7 high.
FED: MNI Fed Preview-September 2025: A Reluctant Return To Easing
We've published our preview of the upcoming FOMC meeting - Download Full Report Here
- The Federal Reserve is set to resume its easing cycle at the September 16-17 meeting with a 25bp cut to the funds rate range to 4.00-4.25%.
- The decision to cut after a 5-meeting pause was well-telegraphed by Chair Powell, whose Jackson Hole speech described a “shifting balance of risks” toward a weaker labor market that “may warrant adjusting our policy stance”.
- The updated quarterly projections aren’t likely to bring many changes to the macroeconomic variables, but as usual the signal sent from the Fed rate “Dot Plot” will garner attention. A Committee split between expecting one or two further cuts this year is likely, keeping each of the remaining meetings of 2025 “live”.
- The Statement will downgrade the description of the labor market to reflect a rise in the unemployment rate and poor payrolls growth, and is likely to include at least one dissent to the rate decision.
- But with a Committee that is fairly divided on the way forward, Powell will be noncommittal on future action, reiterating that policy is not on a preset course, and upcoming decisions will be data-dependent.
- A key undercurrent is an increasingly activist approach to Fed personnel management from the White House, which leaves the composition of the FOMC uncertain not just over the medium-term but also at this meeting.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Sep 15
RATINGS: Fitch: France Cut To A+ From AA, Portugal Up To A From A-
Fitch has downgraded France's sovereign rating to A+ (with stable outlook) from AA-. Release here.
- Among other factors in the decision, Fitch cites "High and Rising Debt Ratio", "Political Fragmentation Hinders Consolidation", "Weak Fiscal Record", "High 2025 Deficit", "Uncertain Fiscal Consolidation Path", and "Fiscal Rigidities".
- In "Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade", Fitch cites "Public Finances: A sustained increase in government debt/GDP over the medium term, due to failure to implement fiscal consolidation measures and/or a persistent increase in financing costs" and "Macro: Materially lower economic growth prospects and weakened competitiveness." Conversely, potentially leading to positive ratings action would be "Public Finances: Confidence that government debt/GDP will be put on a downward trajectory over the medium term, for example, due to fiscal consolidation and/or stronger economic growth".
- Fitch also raised Portugal to A (stable outlook) from A-, while elsewhere, S&P raised Spain to A+ (stable outlook) from A.
- As MNI wrote earlier, we expected France to be downgraded to A+ and Portugal to be upgraded to A.
