Global overview
Last night’s Fed minutes saw markets pare back some hopes for US rate cuts next year and helped the US dollar index stabilize after an almost 4.0% fall so far in November. The Aussie and kiwi turned at key technical levels, but the Chinese yuan extended recent gains. Singapore GDP and US durables goods are the key upcoming releases.
Fed minutes spark USD rebound
The greenback’s recent weakening phase paused overnight with last night’s Federal Reserve minutes causing markets to ease back on expectations that the US Federal Reserve has finished their rate-hiking cycle.
The Fed minutes signaled that while Fed board members agreed to remain on hold at their meeting three weeks prior, most participants agreed that inflation risks remain to the upside, and the Fed would raise rates further if required.
The minutes caused US sharemarkets to ease – the S&P 500 fell 0.2% – while the US dollar gained.
Notably, the AUD/USD and NZD/USD both turned at the 200-day moving average – a key measure of the dominant price trend. Further losses from these levels would signal that the long-standing downtrend has reasserted itself.
On the other hand, the Chinese yuan shook-off any USD strength, with the currency extending recent gains and the USD/CNH down 0.3% to four-month lows.
SGD eases from highs ahead of GDP
With real industrial production (IP) growth for September consistent with the official flash estimate, we expect Singapore’s final Q3 GDP growth will stay at 0.7% y-o-y, unchanged from the advance report. Additionally, this suggests 1.0% q-o-q sa sequential increase, which is better than 0.1% in Q2 and is unchanged from the advance projection.
We anticipate that the Ministry of Trade and Industry (MTI) will provide a projection range of 1.0-3.0% for 2024 for the first time, and reduce its official prediction range from 0.5-1.5% for 2023 to 0.5-1.0% for 2023 at the GDP release. In October, we anticipate that IP growth will further improve to -1.8% y-o-y from -2.1% in September.
This is mainly due to base effects, since medicines and electronics production growth will likely counteract each other. This suggests that sequentially, IP growth slowed to 1.5% m-o-m sa from 10.7%.
The Singapore dollar is near the upper range of the NEER – the trading band monitors by the Monetary Authority of Singapore – so there are downside risks associated with SGD.
SGD rates may underperform in the event that global rates rise, MAS risk is reduced, and flush liquidity circumstances become more restrictive.
US durable goods orders due ahead of Thanksgiving break
Orders for durable goods, excluding transportation, are expected to decline by 0.2% in October. October’s industrial output looks likely to be low, and regional and national Fed polls suggested that fewer new orders were being placed.
We’re looking a 3.9% month-over-month fall in headline durable goods orders, mostly due to the erratic transportation subcomponent after a significant decline in Boeing net orders in October.
However, with the USD recently bouncing from key lows, even a moderately better than expected report tonight might boost the USD ahead of the Thanksgiving break.
USD stages comeback from lows
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 20 – 25 November
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
