Singapore: 2020 GDP seen contracting 6.5% - UOB

Pablo Piovano FXStreet

Economist Barnabas Gan and Senior FX Strategist Peter Chia at UOB Group assessed the latest GDP figures in Singapore.

Key Quotes

“Singapore’s 3Q20 GDP contracted 7.0% y/y (+7.9 q/q sa), according to the advance estimates by MTI. With the latest GDP print, Singapore’s economy fell by 6.9% in the first three quarters of 2020.”

“Despite seeing three consecutive quarters of y/y contraction, the latest GDP print at -7.0% (+7.9% q/q sa) is significantly better compared to 2Q20 GDP which clocked -13.3% y/y (-13.2% q/q sa).”

“The overall GDP decline was dragged by sustained softness in the construction and services sector.”

“The manufacturing sector was a key bright spot, expanding at 2.0% y/y in 3Q20 and compared to a contraction of 0.8% y/y in 2Q20.”

“The latest GDP data in 3Q20 further confirms that Singapore’s economy has been improving since the trough in 2Q20. However, the pace of the recovery has been hampered by the continued softness in the construction sector amid a non-existent tourism demand which further dragged the services sector. As such, we downgrade Singapore’s full-year GDP growth to -6.5% in 2020, down from our initial outlook of -5.0%. Should the pace of recovery be sustained into 2021, the MAS will likely keep policy-parameters unchanged in its April 2021 meeting.”

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

AUD/USD flirts with 0.7000, lowest since early August amid bullish USD

AUD/USD hits a fresh low since early August during the Asian session on Friday and looks vulnerable near 0.7000 after breaking below the 200-day SMA overnight. Against the backdrop of the hawkish Fed, a two-day rally in oil prices revives inflation fears and continues to push US bond yields to multi-year highs. Adding to this, geopolitical risks lift the US Dollar to a two-month high, overshadowing RBA rate hike bets and weighing on the pair.

USD/JPY pulls back from three-week high after failing near 159.00

USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.

Gold treads water below $4,300

Gold grabs some buying attention and advances marginally at the end of the week, partially retracing the weekly decline, although it is still navigating below the key $4,300 mark per troy ounce. The fresh selling bias on the Greenback and the modest decline in US Treasury yields appear to support the humble advance in the precious metal.

Week ahead: Rate hike bets face a crucial data week

Despite the solid drop from the mid-September high, oil prices remained in the driver’s seat for another week, setting the tone in financial markets. Six months have passed since the late-February start of the US-Iran conflict, and there is still no breakthrough in the stalled talks, despite pressure from regional leaders and the rest of the world.

CFTC Report: Defensive currency positioning takes hold

The week in one sentence: Sterling and Euro shorts deepened in the week to September 22, while Yen longs were cut sharply. Oil positioning improved despite a steep price decline, and Gold exposure remained crowded. The main signal was a more defensive currency positioning backdrop.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.