Maybank FX Tech Weekly - 17 Apr 2015

       The greenback has come under pressure for the past few sessions on a slew of disappointing US retail sales, PPI, housing, industrial production, manufacturing activity, initial claims data. This has also led markets to pare back expectations of Fed rate hike. Whether the Dollar sentiment will improve or further deteriorate will depend on tonight’s US Mar CPI (Cons. +0.3% m/m vs. +0.2% in Feb). Higher gasoline prices should help to lift headline CPI. While the USD may see near term pullback, we remain convicted to USD bullish bias; reiterate our house view for the first rate hike to begin in Sep 2015 for year ending 2015. US, being a consumer-based economy should continue to benefit from lower energy prices, which is expected to boost real income growth and consumer spending over time.

       Taking stock of key development in the past week include MAS decision to keep monetary policy stance unchanged, in line with our expectation while market consensus was split. MAS policy statement suggests that the MAS is comfortable with current policy stance and has a bit of a hawkish slant. MAS appear to signal it is confident of an economic recovery in 2H 2015 and beyond. Our view for now is that MAS is unlikely to ease, unless growth over the next 6 months surprise significantly to the downside. We expect SGD to appreciate vs USD in the short term, supported by unwinding of some of the long USD positions. In the medium term, some of these gains could reverse, as we still expect the USD appreciation trend to continue. Singapore 1Q GDP Advanced estimates also beat expectation (+2.1% y/y vs. Cons. +1.7%) while Mar NODX surprised massively to the upside (+18.5% y/y vs. Cons. -1.8%). The outperformance could lead to expectation for an upward revision to both manufacturing and next GDP estimates.

       Week ahead see no major data release. Eyes on Eurogroup meeting (24 – 25 Apr). No progress is expected on Greece; German Finance Minister Schaeuble recently commented “no one expects a solution for Greece at the Eurogroup meeting and that the current (Greece) government has destroyed previous progress.” S&P has downgraded Greece by one notch to CCC+ (negative outlook). Some of the economic releases in the majors we are watching include Australia RBA minutes on Tue; 1Q CPI on Wed (Cons. +0.1% q/q). A upside surprise to CPI inflation could pare back expectation of RBA rate cut and lend further support to AUD. For UK, the BoE minutes on Wed is likely to be a non-event – expect no change in MPC voting pattern (all 9 members voted to keep rate on hold for Apr). For EU, a slew of EC, GE, FR flash manufacturing/services/composite PMIs are due for release on Thu   and GE IFO (Cons. 104.5) on Fri which we expect to see cyclical uptick. For US, focus on Mar Existing home sales (Cons. +2.7% m/m) on Wed; Mar new home sales (Cons. -5.7% m/m) on Thu and Mar durable goods (Cons. +0.6%) on Fri. For AXJ, China is due to release its flash Apr manufacturing PMI (Cons. 49.4) on Thu; Singapore is due to release Mar CPI (Cons. -0.5% y/y) on Thu and Mar industrial production (Cons. -6.6% y/y) on Fri. A strong IP figure could lead to further upside to the SGD on the back of this week’s strong NODX and expectations of a 1Q GDP revision.