USD/SGD mixed post-GDP data; USD/IDR under pressure ahead of bank meeting
The USD/SGD is trading flat a day after Singapore’s larger-than-estimated GDP decline. Meanwhile, the USD/IDR hit a six-week high on Tuesday.
USD/SGD trading mixed a day after Singapore’s GDP release
The USD/SGD forex pair is trading sideways on Wednesday 15 July 2020, a day after Singapore’s Q2 gross domestic product reflected an economy in recession.
On Tuesday 14 July, flash data from Singapore’s Ministry of Trade and Industry revealed that GDP in the second quarter of 2020 declined 12.6% year-on-year, higher than estimates of 10.5% gathered in a Bloomberg survey.
MTI had attributed the drop to the country’s Covid-19 lockdown measures that had been implemented from 07 April to 01 June, as well as to weaker external demand amid the global economic slowdown.
Following that, the greenback rallied 0.3% against the Singapore dollar across the day.
IG analyst Pan Jingyi explains that the forex minor has also ‘kept relatively rangebound of late with the market still largely undecided with regards to the outlook’, as it weighs better-than-expected US earnings and data against rising evidence of a second Covid-19 wave.
For now, she says that strong support can be seen at the S$1.3870 level, while resistance around S$1.3950 ‘could keep the oscillation going in the short-term with little clear direction by means of momentum’.
The USD to SGD exchange rate stands at S$1.39104 as at 13:20 SGT on Wednesday, slightly below Tuesday’s peak of S$1.39467.
IG market analysis show that ‘buys’ form 67% of all trades in the last hour for the USD/SGD. Across the week so far, ‘buys’ form 50% of all trades for the FX minor.
Additionally, 60% of IG client accounts with open positions in this market expect the price to rise, while 40% of open positions are expecting a decline.
USD/IDR facing downside pressure from possible repo rate cuts
Meanwhile, USD/Asians are facing downsides on Wednesday, on the back of improved risk sentiment predicated on stronger-than-predicted US bank earnings and positive Covid-19 vaccine trial results from Moderna Inc.
However, Pan noted that the USD/IDR ‘was the only anomaly’ among Asian currencies on Tuesday 14 July – rising to a six-week high, with ‘bond inflows giving way to some caution’ ahead of Bank Indonesia’s (BI) Thursday (16 July) meeting, where expectations are tied for a rate cut on Thursday.
Fourteen of 26 economists polled by Reuters expect Indonesia’s central bank to lower 7-day reverse repurchase (repo) rate – the country’s interest rate indicator – by 25 basis points to 4.00%. This would be the lowest level since repo rates were adopted by BI in 2016.
According to Pan, a weakened IDR will be a likely corollary of any rate cut on Thursday.
The USD/IDR has since dipped, and is trading at 14674.9 as at 14:50 SGT on Wednesday. IG market analysis show that 43% of IG client accounts with open positions in this market expect the price to rise, while 57% are expecting a price decline.
How to trade forex with IG
Are you feeling bullish or bearish on the USD/SGD, USD/IDR or other USD/Asians? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:
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