14 February 2018
Rates & FX Market Update
Singapore’s 4Q17 GDP Outperformed on Strong Services Sector
Highlights
¨ Global Markets: In the wake of the strong upside wage growth surprise for January, market participants await today’s US CPI release. The Dollar dropped against its safe havens and most of its G10 peers except commodity currencies weighed by a weaker oil. Jerome Powell officially swore in as the new Fed Chair and did not bring new hints as the bank will continue to gradually normalise both interest rates and its balance sheet while sounding cautious on the developing risks to financial stability.
¨ AxJ Markets: Over in Singapore, 4Q17 GDP printed better than consensus expectation (3.6% y-o-y; 2.1% q-o-q SAAR; consensus: 2.9% & 2.0% respectively), amid strong momentum seen in the services sector despite a slowdown in the manufacturing sector. This could imply a trickle-down impact from manufacturing to services that would likely bolster confidence among authorities and the central bank. Market participants will also have greater confidence in pushing hawkish positions ahead of the MAS April review; stay neutral SGD at this juncture.
¨ The USDJPY closed at its lowest level since 2017, below the two bottoms made in 2017. The CPI release today in the US catches all attention as an upside surprise could spur another leg of risk aversion weighing on the pair. However we prefer to remain neutral JPY and cautious as the inflation theme might have been exaggerated in time and space, the risk-off sentiment worsened because of the ramifications to the volatility derivative markets and speculations that Kuroda will be BoJ’s governor for another term maintaining its massive QQE. We eye the 107.45 multi-month range support as the inflection level. In parallel, the equivalent support level for the MYRJPY is at 27.21 where a short term bounce is possible towards 27.81.
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