In the loop

What you should know this morning:

• The rand is stronger this morning, at R17.10/$, after closing stronger yesterday (R17.16/$*).
• EM currencies were mixed yesterday; the BRL (+1.3%), HUF (+0.7%) and MYR (+0.6%) were the biggest gainers; the IDR (-0.5%), PHP (-0.4%) and COP (-0.4%) were the biggest losers.

• The Bank of Canada has raised its key benchmark lending rate by 25 bps, to 4.5%, as expected.
• Following eight consecutive rate increases, the central bank now expects to pause whilst assessing the impact of having tightened rapidly.
• The bank commented that “if economic developments evolve broadly in line with the MPR outlook, the Governing Council expects to hold the policy rate at its current level”.
• The expected pause implies policymakers as being convinced the current rate may be restrictive enough to restore price stability.
• Inflation is expected to have declined into the bank’s 1% to 3% target by mid-year; the bank also expects CPI to return to the 2% target in 2024.

• Several ECB hawks have been highlighting the case for multiple rate hikes.
• Gabriel Makhlouf supports hiking by 50 bps at the next two meetings; he also noted he wouldn’t be surprised if rate hikes continued into Q2:23.
• Bostjan Vasle also favours 50 bps at the next two MPC meetings due to the upside risks to inflation.
• The ECB will meet on 2 February to decide on rates.

• The US GDP for Q4:22 is due out today; economic growth is expected to have moderated to 2.7% q/q, following an increase of 3.2% q/q in Q3:22.
• Personal consumption and business investment are likely to have added to growth, while residential investment is expected to have been a drag on growth for a second consecutive quarter.
• New home sales data for December as well the December advanced goods trade balance are due out today.

• Locally, the attention will be on the SARB’s MPC decision later today.
• Bloomberg consensus expectations are for 50 bps hike at today’s meeting. 
• We expect the central bank to hike by 25 bps.
• Changes to the SARB’s GDP and inflation forecasts will be closely watched.
• Stats SA will release the December PPI print today; expectations are for PPI to have moderated to 13.9% y/y in December, from 15.0% y/y in November.
• On a m/m basis, PPI likely increased by 0.3% in December, following November’s 0.5% increase.
• Eskom has implemented Stage 5 loadshedding as of today and tomorrow.

• Brent crude oil is down this morning, and up by 0.1% year-to-date.
• The gold price is down this morning, and up by 6.7% year-to-date.

• Brent crude oil is currently at $86.01/bbl; ($86.12/bbl*).
• Gold is at $1945/oz ($1937/oz*).
• SA CDS 262bps*, Brazil 244bps* and Turkey 558bps*.
• Yields: US 10yr at 3.44%*, German bund at 2.15%* and SA 10-year generic at 10.37%*, SA’s R186 at 8.15%*.

* Denotes yesterday’s close. 

 Key events and data: 

• 11h30: SA PPI (December)
• 15h00: SA SARB MPC decision
• 15h30: US GDP (Q4:22), advanced goods trade balance (December), durable goods orders (December)
• 17h00: US new home sales (December)

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