Downside risk ahead for the USD/SGD pair

DURING the Federal Open Market Committee (FOMC) meeting on June 19, the US Federal Reserve signalled possible rate cuts of as much as 25 basis points over the remainder of this year. The latest statement differed greatly from the previous forecasts, where the Fed stated that it was being patient on borrowing costs. This has led to expectations that the Fed will reduce interest rates later this month during the FOMC meeting. The CME Fedwatch has indicated that it was almost certain that the Fed would slash rates.

US treasury yields, too, fell, as 10-year treasury yields dipped to the lowest since November 2016, which hinted towards a bleaker outlook for the USD. This was more apparent in the USD/SGD pair, which saw prices break through key support levels.

On a whole, with markets generally holding high hopes for aggressive monetary easing by the Fed, more downside potential exists for the USD/SGD pair.