Currency Briefing - what you need to know for Thurs April 5, 2012

The Singapore dollar is finding a floor at the $1.2535 level but is finding resistance at $1.26.

IG Markets Singapore said:

The Singapore dollar has held steady at $1.2589 against the Greenback despite a strong flight to safety from global investors.

Markets are still suffering the fallout from quantitative easing (QE3) looking less likely to be introduced by the Fed in the near-term. This has seen equities tumble significantly across the US, Europe and Asia. Along with equities, commodities and currencies that are deemed riskier have all taken a hit as traders move back to safe haven assets.

Despite the big sell-off the Singapore dollar has remained firm, although it is trading at the bottom of its tight range against the US dollar. The local currency is finding a floor at the $1.2535 level but is finding resistance at $1.26.

The next event with the potential to move the pair will be tomorrow’s non-farm payrolls data coming out the US on Friday night. It could help improve risk sentiment across the globe if the numbers come in better than expected. But for now the QE3 damage will be quite hard to repair.

RBS meanwhile noted (for 4 April 2012 trading):

Poorly received Spanish auctions helped set the risk-off tone overnight and the US session was very quiet. The ISM non-manufacturing came in softer than expected but at 56.0, the US services sector remains fairly strong.

The ECB press conference featured no changes in the key language and was essentially a non-event for currency markets, which traded in very tight ranges during NY hours. We expect the BoE tomorrow to follow suit and make no changes to the benchmark interest rate or the asset purchase program, which would likely mean no meaningful GBP reaction.

In the UK, a good PMI services number is a positive for GBP, particularly as it represents a significant part of the UK economy. A hat-trick of better UK PMIs this week highlights the growing divergence between the UK and Euro area economies and should weigh on EUR/GBP. While positioning is not in favour of this trade, we think declines may pick up pace if we close below 0.8280.