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.

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:

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