In the loop 02 July 2025

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is stronger this morning, at R17.61/$, after closing stronger yesterday (R17.63/$*).
EM currencies were mixed yesterday; the COP (+1.8%), TWD (+1.4%) and ZAR (+0.5%) were the biggest gainers; the ARS (-1.3%), PEN (-0.6%) and BRL (-0.5%) were the biggest losers.
Asian equity markets are mixed this morning; the Nikkei is down, while the Hang Seng and Shanghai Composite are up.

Several global central bankers are convening at the ECB Forum on Central Banking in Sintra, Portugal, this week.
Fed Chair Jerome Powell yesterday reiterated that the Fed probably would have cut rates further this year, had it not been for President Trump’s tariffs.
He noted the central bank as waiting to see the effects of the tariffs.
The effects are expected to show up in inflation data in the coming months.
The Fed is thus likely to make interest rate decisions on a meeting-by-meeting basis.
However, the Fed chair did not rule out the possibility of a rate cut later this month.

Following yesterday’s Eurozone CPI coming in at 2.0% in June, ECB President Christine Lagarde noted the ECB as having reached its inflation target.
The EU yesterday indicated that it would be willing to accept a trade arrangement with the US that includes a 10% universal tariff on many of its exports.
The EU, however, noted that this would be contingent on the US committing to lower rates on key sectors.
The EU is looking to lower US tariffs on automobiles, car parts, steel, and aluminium.
It is also looking to address non-tariff barriers and sectoral tariffs.

BOE Governor Andrew Bailey remarked that high interest rates have less impact on inflation due to Britain's low levels of debt among both businesses and consumers.
Bailey noted that the UK has adopted a cautious approach to cutting interest rates ”to squeeze out stubborn price pressures in the UK”.
He added that he sees signs of "softening" in the UK economy and labour market.
Bailey expects interest rates to continue on a downward trend; the next interest rate meeting is scheduled for 7 August.

BOJ Governor Kazuo Ueda has commented that the BOJ is waiting for more information to make a judgment on the next monetary policy decision.
He noted that the central bank is in no rush to increase borrowing costs.
Ueda noted that, before making a decision, he will be keeping a close eye on the strength of underlying inflation, the effect of US tariffs, and food inflation.

The US ISM manufacturing index increased to 49.0 in June, from 48.5 in May.
The increase came on the back of increased production activity and improved inventories.
Bookings contracted by the most in three months and have been shrinking for the past five months.
This is likely a reflection of higher tariffs and a general slowdown in the US economy.

The US private sector ADP employment report for June is expected to show an increase in private payrolls of 98k, after having increased by 37k in May.
The data comes ahead of the closely watched non-farm payrolls (NFP) data for June, due out tomorrow.
The NFP for June are expected to have increased, by 110k, down from an increase of 139k in May.
The unemployment rate is likely to have to have increased to 4.3% in June, from 4.2% in May.

Locally, the BER’s inflation expectations for Q2:25 is due out today.
Recall inflation expectations had decelerated further in Q1:25.
The average inflation expectations of analysts, business people and trade unions declined to 4.3% for this year in Q1:25, down from 4.5% in Q4:24.
The slippage came despite a slight uptick in inflation between the two survey periods.
Inflation expectations for 2026 were unchanged, at 4.6% in Q1:25; a slight increase to 4.7% in 2027 is expected.

Brent crude oil is currently at $67.18/bbl; ($67.11/bbl*).
Gold is at $3341/oz ($3338/oz*).
SA CDS 185bps*, Brazil 146bps* and Turkey 285bps*.
Yields: US 10yr at 4.24%*, German bund at 2.57%*, SA 10-year generic at 9.90%*, SA’s R2035 at 9.83%*.

* Denotes yesterday’s close.

Key events and data:

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