USD/SGD Outlook:
Bearish, as the rate is below its 90-day average and near recent lows, pressured by several factors.
Key drivers:
• Rate gap: The Federal Reserve's decision to maintain interest rates is contrasting with Singapore's improving economic outlook.
• Risk/commodities: Recent geopolitical tensions and the "sell America" trend have led to a declining interest in USD assets, negatively affecting the USD against the SGD.
• One macro factor: Singapore's economy grew impressively in Q4 2024, exceeding expectations, which supports the strength of the SGD.
Range:
The USD/SGD is likely to hold within its recent range, drifting towards the lower end as pressures mount.
What could change it:
• Upside risk: An unexpected rise in U.S. inflation could lead to renewed hawkishness from the Fed, boosting the USD.
• Downside risk: Continued geopolitical tensions or a sustained decline in U.S. asset attractiveness might push the USD lower against the SGD.
