Pressured in strong USD environment – OCBC

“The recent CPI report saw May headline and core inflation printed softer-than-expected at 1.8% and 1.4% YoY respectively. They came in below our house view forecast of 1.9% and 1.5% YoY. Higher food and retail and other goods inflation was mostly offset by lower services inflation. “

“Our economists noted that domestic cost pressures are tapering off – services unit labour costs are likely to rise at a slower pace this year as the nominal manpower wage growth moderates from last year with the cooling labour market conditions, whilst domestic consumer spending could also turn more cautious amid the economic uncertainty and higher price environment.”

“With core CPI undershooting expectations and global energy prices easing off, our house now see less urgency for MAS to tighten at the upcoming MPC in July if the core inflation trajectory eases into 1H27.”

“While SGD may retain relative resilience (vs peers), the SGD is not immune to higher US Treasury yields/ firmer USD. A strong USD environment if sustained, may still keep USD/SGD supported in the interim.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)