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Closing the loop 21 September 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger at R17.66/$ (R17.71/$*) today; it ranged between R17.63/$ and R17.78/$.
  • The currency is above its 50-day, 100-day and 200-day moving averages (R16.95/$, R16.47/$ and R15.87/$).
  • EM currencies are mixed today; the COP (+0.5%), ZAR (+0.2%) and MYR (+0.1%) are the biggest gainers; the HUF (-2.4%), PLN (-1.7%) and PHP (-0.9%) are the biggest losers.
  • The dollar strengthened to a 20-year high today following the announcement by Russia's President Putin to mobilise additional troops for the battle against Ukraine.
  • The dollar gained ground against the euro and the pound, while the yen gained slightly against the dollar.
  • European equity markets showed further signs of jitters and declined.
  • These market moves come ahead of the Fed’s interest rate decision later today.
  • The Fed is largely expected to hike rates by 75 bps this evening.
  • The BOE is also expected to hike its benchmark interest rate by 50 bps tomorrow to 2.25%.
  • US existing home sales for August declined less than expected (0.4% m/m from a decline of 5.7% m/m in July).
  • Existing home sales dropped to 4.8 million, the weakest pace since May 2020, from 4.82 million in July.
  • Rising mortgage rates have continued to erode affordability.
  • Locally, the August CPI registered in line with expectations coming in at 7.6% y/y from 7.8% y/y in July.
  • The moderation in headline inflation is mostly attributable to a decline in fuel prices in August; food inflation spiked during the month.
  • Goods inflation declined to 10.9% y/y in August from 11.5% y/y in July while services inflation increased slightly to 4.3% y/y in August from 4.2% y/y in July.
  • Core CPI also moderated in August to 4.4% y/y from 4.6% y/y in July.
  • Despite the moderation in the headline inflation print, the data supports the case for further policy tightening.
  • We expect the SARB to hike the repo rate by 75 bps tomorrow to 6.25%.
  • Eskom continues with Stage 5 loadshedding this evening.
  • The oil price is up by 0.5% today, and up by 17.2% in the year-to-date.   
  • The gold price is up by 0.2% today, and down by 8.8% in the year-to-date.
  • Brent crude oil is at $91.06/bbl ($90.62/bbl*).
  • Gold price is at $1668/oz ($1664/oz*). 
  • SA CDS is at 291bps (294bps*), Brazil 261bps (263bps*), Turkey 740bps (750bps*).
  • Yields: US 10yr at 3.53% (3.56%*), German bund at 1.88% (1.92%*) and SA 10-year generic at 10.99% (11.01%*), SA’s R186 is at 9.08% (9.11%*).
  • The JSE ALSI is down by 0.7% today (+0.2%*).

* Denotes yesterday’s close. 

Key events and data:

  • 10h00: Eurozone ECB publishes economic bulletin
  • 13h00: UK BOE MPC interest rate decision – 50 bps hike expected
  • 14h30: US current account balance (Q2:22), initial jobless claims (17 September)
  • 16h00: Eurozone consumer confidence (September)
  • 16h00: US leading index (August)
  • Japan BOJ MPC interest rate decision – no change expected

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