USD/SGD Outlook: Slightly positive, but likely to move sideways, as the rate is below its recent average and near its short-term highs without a strong driver influencing movement.
Key drivers:
• Rate gap: The Federal Reserve's steady interest rates contrast with Singapore's rising inflation expectations, indicating a softer USD relative to the SGD.
• Risk/commodities: Although oil prices are stable, ongoing global trade uncertainties could limit upward momentum for the USD against the SGD.
• One macro factor: The Monetary Authority of Singapore has updated its inflation forecasts upward, suggesting that strong economic growth in Singapore could bolster the SGD.
Range: Expect USD/SGD to drift within its recent 3-month range, with possible tests at both ends, influenced by inflationary pressures and U.S. economic data.
What could change it:
• Upside risk: A stronger-than-expected ISM manufacturing PMI could lead to a firmer USD.
• Downside risk: Heightened geopolitical tensions could cause further declines in the USD as investors seek safety in the SGD.
