Surprise S$NEER Band Re-Centring Steals Attention From Underwhelming GDP Data

The Singdollar has caught a bid as the local monetary authority unexpectedly tightened currency policy as advance Q2 GDP figures were hitting the wires.

• The MAS decided to re-centre the S$NEER policy band "up to its prevailing level," with no changes to the slope or width of the band, noting that the move "should help slow the momentum of inflation and ensure medium-term price stability."
• Today's adjustment to the S$NEER band was an out-of-cycle move, but some have been calling for a response from Singapore's de facto central bank amid persistently elevated inflationary pressures. The MAS took action today in a pre-emptive move ahead of the upcoming CPI report (July 25).
• The move is less aggressive than the double tightening (S$NEER band re-centring plus raising its slope) delivered last time, but is part of a series of off-cycle tightening steps announced in January, April and today. The next regular policy review will take place in October.
• Meanwhile, quarterly economic growth flatlined in the three months through June, preliminary data showed. Consensus was looking for a 1.0% Q/Q expansion after a 0.7% Q/Q growth recorded in the first quarter. Annual growth was +4.8% Y/Y, undershooting the median estimate of +5.4% Y/Y.
• USD/SGD has gone offered as Singapore's monetary tightening overshadowed unimpressive GDP numbers. The rate last sits at SGD1.3959, down 84 pips on the day, after plumbing a new two-week low at SGD1.3934.
• From a technical perspective, a close below Jul 8 low of SGD1.3973 would mark the completion of a mini-double top pattern, reviving hopes for a deeper reversal towards the 50-DMA, which intersects at SGD1.3871. Bulls look for a rebound above yesterday's high of SGD1.4097, which would suggest that they still have the upper hand.