SGD/EUR Outlook:
Slightly positive, but likely to move sideways, as the rate is near its recent average amidst mixed signals.
Key drivers:
• Rate gap: The Monetary Authority of Singapore's recent accommodative stance contrasts with the European Central Bank's decision to maintain interest rates, supporting GBP strength.
• Risk/commodities: Oil prices have surged recently, well above average, which could bolster the SGD but poses challenges for import-cost pressures in the Eurozone.
• One macro factor: The recent drop in Eurozone inflation to below target raises concerns about future monetary policy adjustments from the ECB.
Range:
Expect the SGD/EUR to hold steady within its recent range as current dynamics appear stable.
What could change it:
• Upside risk: A strong rebound in export-driven sectors in Singapore could enhance SGD strength.
• Downside risk: A further easing of ECB monetary policy due to persistent low inflation could weaken the EUR against the SGD.
