The USD struggled to recover despite a rebound in US nonfarm payrolls to 130k in January, which was double the 65k expected. December’s payrolls were revised down to 48k from 50k. January’s unemployment rate eased for a second month to 4.3% from 4.4% in December and 4.5% in November. The data convinced Cleveland Fed President Beth Hammack that the stabilising labour market did not need additional rate cuts. Kansas Fed President Jeff Schmid wants the Fed to hold rates at a “somewhat restrictive” level because inflation remained above the 2% target. On Friday, January’s CPI headline and core inflation are expected to converge at 2.5% YoY, down from 2.7% and 2.6% in the previous month.
Investors remain wary that the Fed’s steady-for-longer stance would collide with US President Donald Trump’s desire for significantly lower interest rates, especially under the leadership of his Fed Chair nominee, Ken Warsh. Lingering doubts about the Fed’s independence are likely to cap the USD’s upside. At the same time, the Congressional Budget Office’s renewed warnings about the widening fiscal deficits and rising national debt added to de-dollarisation concerns, i.e., recent news of some countries reducing their exposure to US Treasuries.
Singapore will be announcing Budget 2026 today. The Ministry of Trade and Industry has, on February 10, upgraded the 2026 GDP growth outlook to 2-4% from 1-3% previously. The Monetary Authority of Singapore had already raised, at its last review on January 29, its 2026 headline and core inflation outlook to 1-2% from 0.5-1.5% previously. Given the rise in labour productivity amid lower unit labour costs, stable to negative import price changes, and negative domestic supply price changes, we see scope for the SGD policy to remain unchanged in April, as it did last month. According to our model, the SGD NEER has been strong after the policy review, averaging some 0.2% below the policy band’s ceiling. USD/SGD’s decline from 1.27 to 1.2620 was driven mostly by the USD’s weakness against its trade-weighted basket of currencies. While the USD’s tone remains weak, reduced market participation may dampen volatility due to next week’s US holiday and the Lunar New Year holiday across most of Asia.
Quote of the Day
"The most important thing in communication is hearing what isn't said.”
Peter Drucker
February 12 in history
The last Qing Emperor of China, Puyi, abdicated in 1912.
Topic
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