WorldFirst Currency Specialist, Lydia Paik, takes a look at key currency forecasts and considers the many diverse events set to shape global currency markets in 2018.
The US Federal Reserve raised interest rates from 1.25% to 1.50% last December, but the Dollar was slow to respond to the rate hike, and has instead taken a dive since the last FOMC meeting – USDSGD has dropped more than 2% since the rate hike. According to the latest minutes, three more rate hikes are expected in 2018, but the Federal Reserve is divided over the gradual hike against the backdrop of economic and policy uncertainty.
Looking forward, we have the advance Quarter on Quarter (q-o-q) GDP growth report on the 26th January and FOMC on 1st February, likely to be Yellen’s last as her term ends in February 2018.
The Bank of England increased rates for the first time in more than 10 years in late 2017. GBPSGD has increased more than 1% since then, from a bottom of 1.774 in Nov to a high of 1.826 in January 2018. The next decision to increase rate is slated for February 2018, but a hike is unlikely, according to most analysts.
UK retail sales will also be released on 19th January and forecasts indicate a decline due to a slump in retail footfall. The Average Earnings Index will be announced on 24th January, followed by preliminary q-o-q GDP growth reporting on 26th January.
Following one of the best growth periods in more than a decade, the European Central Bank (ECB) revisited its monetary and bond purchase policies in early January. This boosted the EURSGD from a low of 1.5925 to a high of 1.624 in January 2018.
All eyes are on the Minimum Bid rate and the following press conference on 25th January where the ECB is expected to address these topics.
AUDSGD has risen steadily (close to 4%) from the 1-year low of 1.015 to 1.05, following reports that the Reserve Bank of Australia may raise the cash rate for the first time in 7 years. This coupled with concerns relating to Australian household debt (currently at 122% to GDP) and sluggish consumer spending translate into what could be a relatively unstable Aussie dollar for 2018.
CPI will be released at the end of January and traders will be keeping a keen eye on this, as CPI growth disappointed in 2017.
There is consensus that Singapore’s MAS will began tightening its policy in 2018, against a backdrop of stronger-than-expected GDP growth in 2017. Against the greenback, the SGD has surged more than 8% since early 2017, despite MAS’ surprise easing of monetary policy in April 2016. It is expected to strengthen in the early part of 2018.
In his recent speech at the UBS Wealth Insights Conference, Mr. Ravi Menon, Managing Director of the MAS hinted at policy tightening if inflation arrives quicker and higher than expected; which is perhaps a matter of time as signs of inflationary turnaround appear to be increasing.
These comments are the views and opinions of the author and should not be construed as advice. You should act using your own information and judgement. Whilst information has been obtained from and is based on multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed.All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Please consider FX derivatives are high risk, provide volatile returns and do not guarantee profits.