Related Insights
After a week in which global markets clung to the hope of a de-escalation in the US-Iran conflict, market volatility will likely return following the failure of Sunday’s Islamabad Summit between US Vice President J.D. Vance and Iranian Speaker Mohammad Bagher Ghalibaf. US President Donald Trump announced a drastic policy shift by ordering the US Navy to start blockading the Strait of Hormuz by interdicting every vessel in international waters that paid a toll to Iran for safe passage in the Strait.
Trump’s Hormuz blockade also appears to be a maritime compellence campaign that directly rebukes US allies who refused to support the US conflict against Tehran. Trump’s March 17 address characterized NATO and Asian security partners as "free riders" who agreed with the mission but refused to "share the burden." Following the US Supreme Court’s ruling that stripped President Trump of his ability to use the International Emergency Economic Powers Act (IEEPA) for broad-based tariffs, the administration also appears to be weaponizing physical energy security to achieve the same mercantilist ends against its primary trade deficit partners in Europe and Asia.
Hence, expect stagflation to dominate discussions at this week’s International Monetary Fund and World Bank Spring Meetings in Washington, D.C. IMF Managing Director Kristalina Georgieva warned that it would take some time for global prices to come down to levels seen before Operation Epic Fury began on February 27. The IMF World Economic Outlook (WEO), to be released on April 14, will likely include a downgrade to global growth, flagging Asia as the most exposed region due to its high dependency on the Strait of Hormuz for industrial inputs. The divergence between Australia’s two rate hikes this year and New Zealand’s wait-and-see stance reflects how stagflation affects different economies. Australia is operating from a position of resource-backed strength and prioritizing inflation, while New Zealand is struggling with structural fragility and prioritizing growth.
Against this challenging landscape, we expect the Monetary Authority of Singapore to normalize its SGD NEER policy band by reversing the two slope reductions in January and April 2025. We see the MAS raising its core inflation forecast to 1.5-2.5% (from 1-2%) and the CPI-All Items projection to a higher level to reflect the current energy shock. While our model shows the SGD NEER positioned around 1.8% above its mid-point, USD/SGD remains tied to the direction of the global USD, which is currently reprising its haven role on President Trump’s blockade decision.
The Singapore government takes the long-term view that the global order is being challenged by a fundamental shift from a rules-based system to one defined by raw power and zero-sum rivalry. The decades-long post-WW2 global order that prioritized economic efficiency and integrated markets is being aggressively reworked into one that puts security and resilience first. Deputy Prime Minister Gan Kim Yong has framed the Hormuz chokepoint as the worst since the 1973 oil embargo, signalling that Singapore treats this as an existential supply shock, not a standard price fluctuation.
Quote of the Day
“The man who is swimming against the stream knows the strength of it.”
Woodrow Wilson
April 13 in history
The Metropolitan Museum of Art was officially incorporated in 1870, in New York City.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates & Digital Assets)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.