Singapore dollar sits above $1.26

The Singapore dollar is enjoying a period of stability against the greenback this week although it is still trades outside its comfort zone, says IG Markets Singapore.

IG Markets Singapore said:

The Singapore dollar is enjoying a period of stability against the greenback this week although it is still trades outside its comfort zone.

Rather than appreciating against its US equivalent, the local currency lost ground as sentiment turned towards safe-haven currencies.

While it has come off its low of $1.28, the Singapore dollar still sits above $1.26, currently trading at $1.2635 this morning.

Some upbeat US data helped buoy markets last night and saw risk-on trading creep back into the picture.

But there are some key events this week with an ECB policy meeting and non-farm payrolls data in the US to contend with.

These could see FX traders rush back to the safety of the US dollar if outcomes disappoint.

BK Asset Management meanwhile noted (for 3 July 2012 trading):

The only piece of U.S. data on the calendar today was factory orders and while there was a nice increase in the month of May, the impact on the U.S. dollar was nominal.

With North American traders thinking about nothing other than barbeques and fireworks, the dollar traded lower against all of major currencies except for the Japanese Yen. Once traders return from their holidays on Thursday, the focus will quickly shift to Friday's non-farm payrolls report.

On Thursday, the non-manufacturing ISM index will be released which is one of our favorite leading indicators for NFP. The employment component of service sector ISM declined sharply in April and May, which correctly forecasted the pullback in job growth during those months.

If this index fails to rebound on Thursday, it will be hard to believe that payroll growth accelerated. Economists are looking for 90k new jobs in the month of June, up from 69k in May.

The ADP employment change and Challenger job cuts reports will also be released after the holiday.

All these numbers will help to craft the market's expectations for NFPs. Based on the recent price action of the U.S. dollar, investors don't have high expectations for job growth and correctly realize in our opinion that unless more than 150k jobs were created last month the Federal Reserve will still be hard pressed to increase asset purchases later this year.

RBS, on the other hand, reported (for 3 July 2012 trading):

It was another quiet trading session ahead of the US holiday tomorrow and key risk events to close out the week, including BoE and ECB meetings (where we expect policy easing at both) and US Non-farm payrolls.

Immediately ahead are Services PMIs throughout the Euro-area and in the UK and the Riksbank decides on the policy rate. For the Riksbank, the market is currently pricing in a full rate cut by September, implying there is some expectation for a rate cut by the Riksbank in July or September.

As a result, we believe an on-hold decision could play marginally positive for SEK. However, we expect the MPR to still lean on the dovish side, potentially limiting SEK gains on the back of an unchanged rate.

With the concrete details behind the EU Summit results lacking, comments following a meeting of Italy's Monti and Germany's Merkel should be monitored.