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In the loop 07 September 2023

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R19.24/$, after closing weaker yesterday (R19.23/$*).
  • EM currencies were largely down yesterday; the PLN (-1.8%), MXN (-1.4%) and HUF (-0.6%) were the biggest losers; the COP (+0.2%) and CLP (+02%) were up.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down. 
  • The Fed’s Beige Book, released last night, noted growth in the US economy and labour market as having slowed in July and August.
  • It noted that many businesses expect wage growth to ease broadly in the near term.
  • The report highlighted that “most districts reported price growth slowed overall, decelerating faster in manufacturing and consumer-goods sectors”.
  • The report is published two weeks before each FOMC policy meeting; the Fed will next be meeting on 19-20 September.
  • Several policymakers have signalled that they would prefer to pause at this month’s meeting while continuing to assess inflation’s progress.
  • Some have, however, said one or more interest rate increases might be necessary to fully cool price pressures.
  • The US ISM services index overshot expectations in August by increasing to 54.5, from 52.7 in July.
  • Most industries (13) reported growth in August, including entertainment and recreation, and accommodation and food services.
  • New orders surprised on the upside in August, while business activity rose only marginally.
  • The data reflected a surge in demand for services this summer; the boost is thus likely to be only temporary.
  • The Bank of Canada held its benchmark interest rate unchanged at 5% yesterday.
  • The bank, however, kept the door open to further interest rate hikes.
  • Governor Tiff Macklem acknowledged a rapid slowdown in the economy.
  • He noted price pressures as proving tough in getting back to the bank’s inflation target.  
  • In the UK, the BOE’s Decision Maker Panel survey for August will provide an update on price and wage inflation expectations.
  • Firms’ medium-term inflation expectations fell sharply in July, to 3.3%, from 3.7%. 
  • Policymakers are hoping to see expectations stabilising around either that or a lower level in the months ahead.
  • Policymakers keep a close eye on results of the survey as it plays an important role in the committee’s thinking on monetary policy.
  • Should the survey indicate further evidence of strong inflationary pressures in the months ahead in the upcoming CPI and wage data, it may prompt the BOE to hike rates further. 
  • Germany’s industrial production for July is on the cards today; a further decline in production is likely to act as a significant drag on German economic activity.
  • Locally, the SARB’s gross and net reserves for August are due out today. 
  • Net reserves are expected to have slipped to $55.32bn in August, from $55.63 in July.
  • The current account balance for Q2:23 is due for release; the current account deficit is likely to have widened to 2.3% of GDP in Q2:23, from a deficit of 1.0% of GDP in Q1.23.
  • The BER will be releasing the consumer confidence index for Q3:23 today.
  • The July electricity production and consumption data will be released on Thursday.
  • Eskom: Stage 6 loadshedding will remain in place until further notice.
  • Brent crude oil is down this morning, and up by 5.1% year-to-date.
  • The gold price is down this morning, and up by 5.2% year-to-date.
  • Brent crude oil is currently at $90.33/bbl; ($90.60/bbl*).
  • Gold is at $1918/oz ($1920/oz*).
  • SA CDS 249bps*, Brazil 171bps* and Turkey 381bps*.
  • Yields: US 10yr at 4.28%*, German bund at 2.65%* and SA 10-year generic at 11.60%*, SA’s R2030 at 10.40%*.

* Denotes yesterday’s close. 

Key events and data: 

  • 08h00: SA gross and net reserves (August)
  • 10h00: SE BER consumer confidence index (Q3:23)
  • 10h30: UK BOE Decision Maker Panel Survey
  • 11h00: SA current account balance (Q2:23)
  • 11h00: Eurozone GDP, employment (Q2:23 – final)
  • 13h00: SA electricity production and consumption (July)
  • 14h30: US initial jobless claims (2 September)

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