Westpac expects the USD/SGD to climb back to 1.2900 in the 3Q period as "with central banks around the region easing policy (PBOC and BOK most recently), we suspect the (Monetary Authority of Singapore) will be less comfortable with SGD NEER trading so close to the top of the policy band (only 0.75% away based on our estimates)." The house says inflation, the key rationale for tighter policy, seems to be easing, though from elevated levels, and last week's disappointing 2Q growth figures "should feed through into softer inflation outcomes as we progress through the second half of this year." It adds, Singapore's June inflation print due next week (July 23) will be closely eyed; "clearer signs that Singapore inflation pressures are abating could well help bring SGD's recent run of outperformance to an end." The pair is at 1.2648, with Westpac tipping any dips back to 1.2600 as "attractive levels to go long from."
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