Markets Insights

US GDP, local data release to set direction

Economic indicators that appear to pave the way for the MAS to ease its policy settings later this year could, in turn, exert downward pressure on the Singapore dollar over the near term, said FXTM market analyst Han Tan.
Economic indicators that appear to pave the way for the MAS to ease its policy settings later this year could, in turn, exert downward pressure on the Singapore dollar over the near term, said FXTM market analyst Han Tan.BERITA HARIAN FILE PHOTO

Quarterly data will help traders weigh effect of trade war on economy, earnings

SINGAPORE - For much of this month, investors have taken positively to what they hope are rate cuts by the US Federal Reserve at the month's end as well as hopes that United States-China trade talks are getting back on track.

That said, there are concerns that markets are too optimistic about the extent of the rate cuts and there are many issues yet to be ironed out between the US and China.

Charles Schwab chief investment strategist Liz Ann Sonders noted: "Rather than climbing the proverbial 'wall of worry', the recent move seems to be more of riding the escalator of optimism."

Following the release of China's second-quarter gross domestic product data last week, it is time to assess the US' economic performance - its second-quarter GDP is out on Friday (July 26)  - for the effect trade war escalations has on its economy and corporate earnings.

Likewise, in the local market, investors are gearing up for the corporate earnings season for the April-to-June period but there is still economic data to digest.

A slew of data indicators on Singapore will be released this week.

This follows disappointing second-quarter advanced estimates for GDP and non-oil domestic exports data in the past weeks, which showed electronics-related production to be the weak spot in the local economy. Second-quarter GDP advanced estimates showed manufacturing contracting 3.8 per cent.

FXTM market analyst Han Tan said: "For the week ahead, investors will be looking out for Singapore's inflation and industrial production announcements, both for the month of June. Economic indicators that appear to pave the way for the Monetary Authority of Singapore to ease its policy settings later this year could, in turn, exert downward pressure on the Singapore dollar over the near term."

June consumer price index and core inflation figures will be out on Tuesday. According to Bloomberg consensus estimates, inflation for last month could come in at 0.7 per cent year on year, and core inflation, which strips out housing and private transport costs, at 1.2 per cent year on year.

Industrial production figures will be out on Thursday, with the market expecting a 7.3 per cent year-on-year contraction.

United Overseas Bank senior economist Alvin Liew noted that with May's industrial production contraction of 2.4 per cent and April's mild gain of 0.1 per cent, the bank thinks "June's industrial production contraction may worsen to 8.5 per cent year on year".

Friday sees the second-quarter unemployment rate and the final print for the Urban Redevelopment Authority private home prices for the second quarter.

A version of this article appeared in the print edition of The Straits Times on July 22, 2019, with the headline 'US GDP, local data release to set direction'. Print Edition | Subscribe