Singapore dollar trades in tight range

The US dollar sits at $1.2483 against the local currency.

IG Markets Singapore said:

The Singapore dollar continues to trade in a tight trading range against the greenback as volumes and activity remain thin this week.

On the local currency side, the Singapore government has reinforced its stance of tackling inflation stating that more easing is within its scope.

The US dollar sits at $1.2483 this morning against the Sing dollar despite some upbeat US retail sales data released last night.

Eurozone economic data also came in better than expected to improve risk-on sentiment.

But this had limited effect on the currency markets, as firmer data reduces chances of central banks’ policy easing.

DBS Group Research meanwhile noted:

Since the start of this month, EUR/USD has tried and failed many times to close above its 50-day moving average, currently located at 1.2389. The currency pair closed at 1.2321 yesterday, down from its recent high of 1.2443 seen on August 6.

As far as data releases go, we have seen more upside surprises in the US and more downside surprises in the Eurozone and its countries.

In the US, nonfarm payrolls were 163K in July, significantly higher than the 100K consensus. Although the US unemployment was higher at 8.3% saar in July vs 8.2% a month ago, it was still markedly lower than the record high 11.2% jobless rate in Eurozone.

It also helped that US initial jobless claims did not deviate far above its post-2008 crisis lows. Another relief in the US was the rebound in retail sales in August; sales were up 0.8% MoM saar after falling for three straight months.

On the other hand, Eurozone real GDP contracted 0.2% QoQ saar in 2Q12, the second fall in three quarters. In YoY terms, real GDP growth was -0.4%, the first contraction since the five-quarter recession between 4Q08 and 4Q09. More importantly, the weak numbers were coming from the large EU countries.

Italy’s economy shrank for the third straight quarter by -2.5% in 2Q12 vs -1.4% in 1Q12 and -0.5% in 4Q11. Spain has to date contracted for two straight quarters, by -1.0% in 2Q12 and -0.4% in 1Q12. Against these numbers, it no longer seems impossible that Italy may formally ask for a bailout before Spain.