SGD FX Outperforms on MAS Tightening & Q3 GDP Beat

USD/SGD has dipped around 0.50% post the MAS tightening. We were above 1.4300 prior, but now sit close to 1.4235 at the time of writing. The Goldman Sachs SGD NEER estimate is up a further 0.6% from NY closing levels. The tightening leaves more upside for the NEER to appreciate given we were near the top end of the band prior to today's policy announcement.

• This, arguably, is the safer way to play SGD outperformance given so much uncertainty surrounding the broader USD outlook. The MAS's tighter policy stance, coupled with its strong external fundamentals, leaves it well positioned to outperform further during the current bout of USD strength.
• Further MAS tightening's also can't be ruled out, given MAS stated there are upside risks to their inflation projections. The central bank raised the 2023 outlook to 3.5-4.5% for core inflation, headline at 5.5-6.5%. Meaningful inflation relief is not seen until the second half of next year.
• Also note Q3 GDP, which was released at the same time, was better than expected. Q/q growth rose 1.5% (0.7 expected and -0.2% previously). This kept y/y growth close to unchanged at 4.4% (3.5% expected).
• The MAS noted clouds are growing over the external outlook, but the domestic recovery should continue in the near term. The central bank expects below trend GDP growth for the economy next year.