SINGAPORE: MAS Seen On Hold Tomorrow, But Likely To Be A Close Call
The MAS meeting outcome for July will be released tomorrow morning at 8am local time. The sell-side consensus is for now change, although some forecasters expect the central bank to ease further. BBG noted: "Fourteen of 19 economists in a Bloomberg survey forecast the Monetary Authority of Singapore will maintain its settings on Wednesday." (see this link for more details). Our bias is for the central bank to hold policy settings steady, after the central bank eased earlier this year in Jan and April. Still, it is likely to be a close call between on hold and further easing.
- The case for further easing rests with the benign inflation backdrop, coupled with risks to the growth outlook, particularly on the trade side. The first chart below plots the trends in headline and core inflation against the y/y change in the SGD NEER (source MAS).
- Inflation prints have been very modest in recent outturns. Data up to June showed headline at 0.8%y/y, while core was at 0.6%y/y, both unchanged from May readings and slightly below market forecasts. At face value, the +1.4%y/y rise in the NEER looks too firm for such inflation trends.
- At the last policy meeting, the central bank noted: "MAS Core Inflation is now forecast to average 0.5–1.5% in 2025, down from 1.0–2.0% in the January 2025 MPS." Recent inflation outcomes are very much consistent with the outlook from April, if not slightly lower .
Fig 1: Singapore Inflation Trends & SGD NEER Y/Y
Source: Bloomberg Finance L.P./MAS/MNI
- On the growth side, Singapore avoided a technical recession by posting firmer than expected growth in Q2. The advance estimates showed growth up 1.4%q/q, versus 0.8% forecast. The Q1 fall was -0.5%.
- Better exports helped the economy, while construction was also firmer in Q2. There is much uncertainty around the H2 outlook though, particularly on the trade front, given higher tariff levels are coming in for many key global economies/regions.
- At the last meeting the MAS stated on growth: "For 2025 as a whole, Singapore’s GDP growth is expected to slow to 0.0–2.0% from 4.4% last year. "
- At the margin, the central bank may take some comfort from the worst of the possible trade scenarios on tariffs being avoided for now.
- This, along with the economy bouncing nicely in Q2, may see the MAS comfortable to remain on hold tomorrow, albeit still with an eye to ease further.
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US FISCAL: Available "Extraordinary" Measures To Ward Off X-Date Pick Up
Treasury reported Friday that as of Jun 25 it had $130B in remaining "extraordinary" measures (of a total $378B available) to ward off an "x-date" of running out of resources before defaulting. That's the highest in 2 weeks.
- Combined with $334B cash as of Jun 25 (after a bit of a buildup after the mid-June tax deadline), that's a total of roughly $465B in total resources available.
- We noted earlier this week that Treasury told Congress that it was required to extend its debt issuance suspension period from Jun 27 to Jul 24, in effect prolonging the use of extraordinary measures while we await a resolution to the debt limit impasse, probably through the fiscal legislation currently going through Congress.
- Realistically, fiscal dynamics so far this year point to potential for Treasury to get into September without running out of cash + extraordinary measures. That seems to be the broad market expectation.
US DATA: Cleveland, Dallas Fed PCE Medians Show Progress But Still Above-Target
The Cleveland and Dallas Fed's median PCE metrics showed a notable drop in May. All indices suggest PCE inflation running above 2%, and higher than the actual core and headline PCE measures, but pressures appear to have cooled from a pickup in the early months of the year.
- The Cleveland Fed's median PCE measure came in at 0.22% M/M, a 10-month low after April's 15-month high 0.31%. This left median PCE at 3.01% on a Y/Y basis, down from 3.06% prior for a the joint-lowest (with Feb) since September 2021.
- The Dallas Fed's annualized median rate fell to 2.01%, from 2.65% prior for a 10-month low. The 6-month annualized rate edged lower to 2.74% (2.76% prior), a 4-month low, with the Y/Y rate ticking down to 2.55% from 2.56%, echoing the Cleveland Fed for the lowest reading since September 2021.
USDCAD TECHS: Pivot Resistance Remains Intact
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.2710/3803 20- and 50-day EMA values
- PRICE: 1.3658 @ 16:23 BST Jun 27
- SUP 1: 1.3618 Low Jun 26
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD has pulled back from its recent highs. The primary downtrend remains intact and short-term gains appear to have been corrective. Key support and the bear trigger has been defined at 1.3540, the Jun 16 low. Clearance of this price point would resume the downtrend. Any reversal higher would instead signal scope for a stronger retracement. Pivot resistance to monitor is at the 50-day EMA, at 1.3803.
