The Singapore economy contracted 6.0% in the second quarter as weaker demand from the major economies-lead by the U.S. - has weighed on exports. The country saw a better than expected 2.1% gain on an annualized basis, on the back of strong demand from China and Australia. However, as those economies begin to slow the growth outlook for Singapore has diminished.
Talking points
• Singapore Economy Shrinks in 2Q
• USDSGD Highest in Almost Six Months
• USDHKD Finds Resistance at 7.8148
Singapore Dollar Falls To Lowest In Almost Six Months
The Singapore economy contracted 6.0% in the second quarter as weaker demand from the major economies-lead by the U.S. - has weighed on exports. The country saw a better than expected 2.1% gain on an annualized basis, on the back of strong demand from China and Australia. However, as those economies begin to slow the growth outlook for Singapore has diminished. Indeed, the Ministry of Trade and Industry has revised their outlook from 4-6% to 4-5%. A drop in the volatile pharmaceutical component led to manufacturing declining 13.3%. Strong domestic growth fueled a 6.3% gain in construction as personal consumption rose 5.4%.
The USDSGD reached as high as 1.4103 during Asian trading- the highest since February 22, but a strong EURUSD move on the back of hawkish comments from ECB officials, saw the pair fall below 1.4025. Broad based dollar weakness is also contributing to the move lower as the outlook for the upcoming consumer consumption report is diminishing as the effect from rebate checks lessens.
The Hong Kong Dollar was see similar price action reaching as high as 1.4148 the highest since June 20th, before falling to 7.8019 on dollar weakness. Like Singapore the Asian nation is also seeing its growth outlook diminish. Indeed, HKMA Chief Joseph Yam warned of the downside risks to economic growth due too headwinds from the U.S. The growth outlook for the country has been lowered to 5% versus the 7.3% that it has averaged the past four years.
An empty economic calendar on both sides will leave price action to the broader economic winds with a the outlook for domestic growth in the U.S. diminishing, we could see a pull back in the dollar especially after its sharp appreciation the past few days. Also, oil rising above $116 a barrel will also take the steam out of the greenback.
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