UOB has released its Quarterly Global Outlook for Q3 2025, detailing significant economic challenges posed by rising US Treasury yields and a weakening US dollar. The report underscores the impact of US trade tariffs and fiscal policies on global markets, with investors increasingly wary of the US’s growing debt and financial instability. The Federal Reserve’s cautious stance amid these uncertainties has further complicated the economic landscape.
The report predicts a moderation in Singapore’s economic growth to 1.7% for 2025, with a weaker second half due to diminishing front-loading momentum and adverse base effects. This slowdown is expected to extend into 2026, with GDP growth forecast to decline to 1.4%. Core inflation is projected to average 0.7% for 2025, with potential downside risks from weaker external demand.
UOB anticipates the Monetary Authority of Singapore (MAS) will ease policy in July 2025 by flattening the Singapore dollar nominal effective exchange rate (S$NEER) slope to 0% per annum. This move aligns with expectations of the Federal Reserve resuming its easing cycle, which could narrow the US dollar’s interest rate differentials and exert further downward pressure on the currency.
In the foreign exchange market, UOB maintains a cautious outlook for Asian currencies, projecting a near-term rise in USD/Asia pairs before a reversal in late 2025. The report also forecasts a continued decline in the US dollar index (DXY), with the euro, pound, and Australian dollar expected to strengthen against the dollar by mid-2026.
UOB’s rates strategy includes predictions of three 25 basis point cuts by the Federal Reserve in the latter half of 2025, with US Treasury yields expected to remain high before gradually easing. The report also highlights a strong rally in gold prices, driven by a weaker US dollar and robust demand from China, whilst maintaining a cautious stance on Brent crude oil due to global trade uncertainties.
Overall, UOB’s outlook suggests significant economic challenges ahead, with implications for both global and Singaporean markets as they navigate the complexities of rising yields and a weakening US dollar.
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