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Closing the loop 09 December 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is weaker at R17.31/$ (R17.16/$*) today; it ranged between R17.09/$ and R17.34/$.
  • The currency is below its 50-day and 100-day moving averages (R17.71/$ and R17.40/$) and above its 200-day moving average (R16.53/$).
  • EM currencies are mixed today; the KRW (+1.3%), RUB (+1.0%) and CLP (+0.4%) are the biggest gainers; the ZAR (-0.9%), BRL (-0.8%) and MXN (-0.5%) are the biggest losers.
  • The BOE noted today that inflation expectations have increased further above the bank’s 2% target.
  • Consumers in November expected inflation in the UK to rise to 3.4% within the next two years, up from 3.2% from the August IPSOS survey.
  • Five-year inflation expectations increased to 3.3%, up from 3.1% previously.
  • In addition, it’s been reported that more people were dissatisfied with the way that the BOE is doing its job.
  • The data adds to concerns that rising prices are becoming entrenched into the UK economy.
  • It supports the case for policymakers to lift rates further to rein in inflation. 
  • The BOE meets next week and is expected to lift its benchmark lending rate by 50 bps to 3.5%.
  • The Fed and ECB are also due to make policy decisions next week. 
  • The US CPI data for November is due out ahead of the FOMC interest rate decision.
  • CPI is likely to have moderated to 7.3% y/y from October’s 7.7% y/y increase.
  • The Fed is expected to slow the magnitude of rate hikes to 50 bps next week; this follows 4 consecutive 75 bps rate hikes this year.
  • The Fed has hiked rates by a cumulative 375 bps this year.
  • The ECB is also expected to lift rates by 50 bps to 2.5% next week. 
  • The slowdown in rates hikes is being aided by a less aggressive Fed.
  • CPI also moderated for the first time in 1.5 years to 10% y/y in November from 10.6% y/y in October. 
  • Locally, it was a quiet day as far as data releases were concerned.
  • Eskom: Stage 5 loadshedding continues until further notice.
  • The ANC’s NEC concludes its meeting to consider reports by its ethics body that evaluates the conduct of President Cyril Ramaphosa and Zweli Mkhize at 6pm today.
  • The committee will consider findings from the probe into President Ramaphosa’s handling of the theft on his farm.
  • The second report under consideration is the investigation into the scandal that led to Mkhize’s resignation as the health minister.
  • Any ANC member that the party’s integrity committee has recommended should step aside is barred from running for party leadership positions.
  • The ANC’s elective conference kicks off next week from 16 – 20 December.
  • The oil price is up by 0.4% today, and down by 1.7% in the year-to-date.   
  • The gold price is up by 0.6% today, and down by 1.8% in the year-to-date.
  • Brent crude oil is at $76.47/bbl ($76.15/bbl*).
  • Gold price is at $1797/oz ($1787/oz*). 
  • SA CDS is at 263bps (265bps*), Brazil 241bps (243bps*), Turkey 524bps (532bps*).
  • Yields: US 10yr at 3.47% (3.48%*), German bund at 1.87% (1.82%*) and SA 10-year generic at 11.04% (11.00%*), SA’s R186 is at 8.88% (8.85%*).
  • The JSE ALSI is up by 0.2% today (+0.6%*).

* Denotes yesterday’s close. 

Key events and data:

  • On Monday: 01h50: Japan PPI (November)
  • 08h00: Japan machine tool orders (November)
  • 09h00: UK GDP (October), industrial and manufacturing production (October), trade balance (October)

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