In the loop 20 January 2023

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is stronger this morning, at R17.28/$, after closing weaker yesterday (R17.32/$*).
EM currencies were mixed yesterday; the COP (+0.6%), RON (+0.5%) and KRW (+0.4%) were the biggest gainers; the MXN (-1.4%), ZAR (-1.2%) and RUB (-1.2%) were the biggest losers.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.

Federal Reserve Vice Chair Lael Brainard has echoed other policymakers’ views that US interest rates would need to stay elevated for some time to further tame inflation.
Brainard noted inflation as showing signs of slowing but still remaining too high.
Brainard, however, didn’t state her preference for the Fed slowing the magnitude of rate hikes to 25 bps at the next meeting.
She also discussed signs of cooling inflation and economic activity.
She suggested that jobs and prices could ease without a big loss of employment.
The FOMC interest rate decision is expected on 1 February.

The US housing market data, out yesterday, showed some signs of improving activity.
While housing starts and building permits slipped in December, the MBA mortgage applications index soared in the week ending 13 January.
Mortgage rates are also currently at their lowest level since September 2022, according to Freddie Mac.
This bodes well for buyers as the spring season kicks off.
Homebuilder sentiment also increased in January for the first time since the end of 2021.
Existing home sales data for December is scheduled for release today.

BOE Governor Andrew Bailey noted yesterday that it’s likely that CPI may have turned the corner following two months of declines.
Bailey commented that it’s a sign that the UK economy may be overcoming the worst of the cost-of-living squeeze.
He further noted that inflation could fall quite rapidly this year.
The GfK consumer confidence for January, out this morning, saw sentiment deteriorate, remaining in negative territory, at -45, from -42 in December.
The weaker-than-expected reading comes on persistently higher inflation and rising energy bills.

Locally, it’s a quiet day as far as data releases are concerned.
Eskom: Stage 4 loadshedding is currently in place until 4pm; Stage 5 loadshedding will resume then.

Brent crude oil is currently at $86.26/bbl; ($86.16/bbl*).
Gold is at $1923/oz ($1920/oz*).
SA CDS 262bps*, Brazil 246bps* and Turkey 564bps*.
Yields: US 10yr at 3.39%*, German bund at 2.06%* and SA 10-year generic at 10.46%*, SA’s R186 at 8.20%*.

* Denotes yesterday’s close.

Key events and data:

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