That 14 April ultra-signficant signal is getting warmer
Recall this post I wrote on 14 April – the day Monetary Authority of Singapore (MAS) moved to a neutral policy the first time since 2008.
It is imperative to take note because market conditions are going to worsen in the next few months.
Considering that MAS has all its eyes on the global situation, in my opinion this is how the decision announced today was arrived at – the global situation now must resemble October 2008!
Which the story ended with this.
Is XAUUSD the canary in the coal mine?
Since that 14 April blog post, the whole signal is getting warmer to this predicted outcome – global easing i.e. QE aka currency devaluation/cheapening.
Rate cuts/ QE/ helicopter money/ ZIPR / NIRP is coming
- Before Brexit, Yellen was in a fix to delay her vaunted rate hikes while justifying how the US economy is supposed to be excellent. Post-Brexit she has the perfect cover to stop hiking. If she were to freeze/cut rates now, she would get a standing ovation because all she has to do is to remind investors of market volatility like that seen on 24 June if she did not step in.
- Gold which is the ‘canary in the gold mine’ printed a high of 1357.50 today. This is my opinion undeniable evidence that the market is preparing for coordinated fiat currency devaluation including GBP (at the centre of Brexit storm), RMB ( which is getting dearer when everyone else devalues) and USD (for being the big brother that everyone else looks to for safety). If the function of gold is not clear enough, the perfect example is UK where people quickly formed queues to buy gold while the GBP is plunging.
- The case for gold also explains why stock markets are rallying full-retard despite how nasty we were told Brexit was going to be. (Note the whole Brexit before and after smelled BS. To avoid Brexit, the establishment did some high level fear mongering. After Brexit, they had to u-turn the damage done to financial markets by explaining markets were rallying because Brexit wasn’t going to happen despite the exit vote.) In my opinion, the truth is anticipation for next round of global easing. Markets are rallying because they see the money spigot opening. And since money itself is going to be devalued/cheapened, there is a global race to secure any remaining value/safety/yield left (which also explains bond rally and falling yields).
- And then finally and most importantly, note these and 2 charts attached at the end.
MAS had to adopt a bullish stance on the Singapore Dollar in 2014- 2015 based on expectation of rate hikes by the US Federal Reserve so that it can walk in step with the USD strengthening in order to maintain a stable exchange.
Now that the forex market is betting on diminished if not outright ‘no hikes’, naturally speculators will be betting SingDollar appreciation if MAS kept it’s appreciative stance.
The perversity of today’s move lies here: by moving to a neutral stance as a signal to speculators not to bet on SingDollar strengthening, MAS is acknowledging that they agree that US Federal Reserve is unlikely to hike rates anymore.
When market finally realises/achieves full consensus the Fed is never going to hike, USDSGD will turn down strongly in favour of SGD strengthening because of rejection to the toxic USD.
Prospects for SingDollar looks very good even for MAS’s neutral stance.
- Finally finally note SGD’s previous decade long bull-run. In this very long context, SGD strengthening (together with gold) will turn out to be continuation of a previous decade long trend.