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In the loop 15 May 2024

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is stronger this morning, at R18.36/$, after closing weaker yesterday (R18.38/$*).
  • EM currencies were mixed yesterday; the COP (+1.1%), CLP (+0.8%) and PLN (+0.6%) were the biggest gainers; the ZAR (-0.2%), TRY (-0.2%) and MXN (-0.2%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei is up, while the Hang Seng and Shanghai Composite are down.
  • The People’s Bank of China has kept its 1-yr medium-term facility rate unchanged, at 2.5%.
  • However, the case for easing rates remains strong.
  • US Fed Chair Jerome Powell reiterated yesterday that the Fed would need to be patient as it awaits more evidence that high interest rates are curbing inflation.
  • He noted that it may take longer than previously thought to attain the confidence needed to lower interest rates.
  • Powell described monetary policy as restrictive by “many, many measures”.
  • He added that time would tell if policy is sufficiently restrictive to steer inflation back to the Fed’s 2% inflation target.  
  • Kansas City Fed President Jeffrey Schmid said that interest rates could remain high “for some time” as policymakers await evidence that price pressures are easing.
  • Minneapolis Fed President Neal Kashkari and Fed Governor Michelle Bowman are due to make comments on the US economy later today.
  • The US April CPI is in the spotlight today; both headline and core inflation are likely to have moderated in April.
  • Headline CPI is likely to come in at 3.4% y/y in April, from 3.5% y/y in March; core CPI is expected at 3.6% y/y in April, from 3.8% y/y in March.
  • The outcome will likely have an impact on the start of the Fed’s interest rate cutting cycle.
  • Should CPI overshoot expectations, it could further delay the first interest rate cut.
  • The Fed, however, is largely expected to begin its rate cutting cycle in Q3:24.
  • US retail sales for April likely slowed entering Q2:24 from March’s elevated pace.
  • Business inventories for March likely declined by 0.1% m/m in March, following an increase of 0.4% m/m in February.
  • The NAHB housing market index for May is due for release today; sentiment among home builders likely slipped in May.
  • The Eurozone Q1:24 GDP is likely to come in at 0.3% q/q, matching the increase in Q4:23.
  • Eurozone industrial production for March is likely to have increased by 0.4% m/m, from 0.8% m/m in February.
  • Locally, retail sales for March are expected to have declined by 0.6% y/y, following the 0.8% y/y decline in February.
  • On a m/m basis, sales are likely to have increased by 0.2% in March, after increasing by 0.4% in February.
  • Eskom: loadshedding remains suspended until further notice.
  • Brent crude is up this morning, and up by 7.6% year-to-date.
  • The gold price is up this morning, and up by 14.2% year-to-date.
  • Brent crude oil is currently at $82.88/bbl; ($82.38/bbl*).
  • Gold is at $2356/oz ($2354/oz*).
  • SA CDS 227bps*, Brazil 141bps* and Turkey 275bps*.
  • Yields: US 10yr at 4.43%*, German bund at 2.54%*, SA 10-year generic at 11.90%*, SA’s R2030 at 10.49%*.

* Denotes yesterday’s close.

Key events and data:

  • 11h00: Eurozone GDP (Q1:24), employment (Q1:24), industrial production (March)
  • 13h00: SA retail sales (March)
  • 13h00: US MBA mortgage applications (10 May)
  • 14h30: US Empire manufacturing (May), CPI (April), retail sales (April)
  • 16h00: US business inventories (March), NAHB housing market index (May)

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