In the loop 30 January 2023

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R17.19/$, after closing stronger on Friday (R17.18/$*).
EM currencies were mixed on Friday; the MXN (+0.2%), ZAR (+0.2%) and PEN (+0.2%) were the biggest gainers; the COP (-1.3%), BRL (-0.8%) and CLP (-0.5%) were the biggest losers.
Asian equity markets are mixed this morning; the Nikkei and Hang Seng are down, while the Shanghai Composite is up.

In the US, the Fed’s first FOMC meeting for the year will kick off this week; the Fed is largely expected to slow the pace of rate hikes to 25 bps.
The risks are possible dissent from one or more policymakers that would prefer rates to reach a more restrictive level sooner.
Fed Chair Jerome Powell is likely to comment that the Fed would still need to see more convincing signs of inflation slowing towards the bank’s 2% target.
Powell has noted previously that his risk-management preference is to go slow amid uncertainty.
The ADP employment report and the non-farm payrolls (NFP) report for January are also in the spotlight this week.
The ADP payrolls are expected to have increased by 165k in January, from December’s 235k increase.
NFP are expected at 188k in January, following an increase of 223k in December; the unemployment rate is likely to have increased to 3.6% in January, from 3.5% in December.
Going forward, job creation may cool more significantly; consumers have been more downbeat about the trajectory of the US labour market lately.
The ISM manufacturing PMI for January will also be released this week.

The BOE and ECB will meet this week (Thursday); both central banks are expected to hike their benchmark interest rates by 50 bps.
Expectations are for the ECB to continue hiking rates by a further 50 basis points in March before a slowdown in rate hikes by the May policy meeting.
The BOE is largely expected to slow the pace of tightening in March, and then pause.
Eurozone GDP data for Q4:22 is due out this week and is expected to reflect resilience despite the squeeze on real incomes caused by the energy crisis.
Eurozone CPI for January is due out on Wednesday and is expected to come in at 9.0% y/y, from 9.2% y/y in December.

Chinese markets reopened today after the Lunar New Year holiday.
China’s PMI data are due out this week; both the services and manufacturing sectors are likely to reflect an improvement in January.
In Japan, industrial production for December is due out tomorrow; a decline is expected due to weaker US and European demand.
The unemployment rate for December, also scheduled for release on Tuesday, is expected to have remained unchanged, at 2.5%.

Locally, the M3 and private sector credit extension (PSCE) are scheduled for release tomorrow; PSCE is likely to have increased by 8.3% y/y in December, the same as in November.
The trade balance for December is due out tomorrow; the trade surplus is expected to have compressed to R5.3bn, from R8.0bn in November.
The January PMI, due out on Wednesday, likely slipped to 52.1, from 53.1 in December.
The industry-wide PMI January, due on Friday, is also expected to have slipped, albeit marginally.
The Naamsa vehicle sales data for January, also due on Wednesday, likely increased by 7.5% y/y, following a 16.2% y/y increase in December.
Electricity production and consumption data releases are also on the cards this week.
Eskom: Stage 4 loadshedding has been implemented until further notice.

Brent crude oil is currently at $86.28/bbl; ($86.66/bbl*).
Gold is at $1932/oz ($1928/oz*).
SA CDS 253bps*, Brazil 234bps* and Turkey 556bps*.
Yields: US 10yr at 3.50%*, German bund at 2.23%* and SA 10-year generic at 10.39%*, SA’s R186 at 8.12%*.

* Denotes Friday’s close.

Key events and data:

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