SGD: MAS Surprises with a Zero Slope - Nomura
Research Team at Nomura, notes that the Monetary Authority of Singapore
(MAS) announced a shift to a zero rate of appreciation of the S$NEER
policy band, with no change to the mid-point or slope.
Key Quotes
• “Consensus and Nomura expectations were for no change to FX policy.
•
We expect MAS policy to remain unchanged over the remainder of the
year, but we attach an approximate 30% probability to further easing,
given the potential external headwinds for the economy. Following
today’s policy move, any further easing would most likely take the form
of a re-centering of the mid-point of the policy band.
•
Following the significant depreciation in S$NEER, we reduce our short
S$NEER position by 50%. We continue to expect it to trade in a -1.0 to
+0.5% range around the mid-point. We also remain short SGD/MYR.
•
Q1 GDP growth was unchanged in Q1 from Q4 at 1.8% y-o-y, with some
improvement in manufacturing and construction offset by weaker services
sectors. We maintain our full-year 2016 forecast of 1.8% (official
forecast: 1.0-3.0%).
• The MAS expects core inflation to be in
the lower half of its unchanged 0.5%-1.5% forecast range, consistent
with our forecast of only a slight rise to 0.7% in 2016 from 0.5% in
2015.
• On rates, we suggest investors maintain a flattening
bias in SGD rates. We maintain our recommendation to receive
6mfwd2s5s10s in SGD IRS.”
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