In the loop 18 January 2023

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R17.09/$, after closing weaker yesterday (R17.07/$*).
EM currencies were mixed yesterday; the BRL (+0.9%), CLP (+0.8%) and MXN (+0.5%) were the biggest gainers; the COP (-1.1%), IDR (-0.8%) and CNY (-0.5%) were the biggest losers.
Asian equity markets are mixed this morning; the Nikkei is up, while the Hang Seng and Shanghai Composite are down.

The Bank of Japan has held steady on policy by keeping its key policy rate unchanged at -0.1% and its cap for 10-year JGB yields at 0.5%.
There had been speculation ahead of that decision that the central bank might still target policy normalisation.
The bank noted that it would continue large-scale bond buying and increase those on a flexible basis if needed.
The bank updated its inflation forecast; the central bank raised its outlook for inflation this fiscal year and next.
It still doesn’t see inflation staying above 2% in a sustainable manner over the coming years.
The BOJ cut its growth forecasts for fiscal 2022, 2023 and 2024.

An ECB spokesperson commented yesterday that policymakers are considering a slower pace of interest-rate hikes than what was indicated in December.
The ECB is largely expected to hike rates by 50 bps in February.
The prospect of a smaller 25 bps increase at the March policy meeting is gaining support.
The ECB official noted that “any slowdown in monetary tightening shouldn’t be viewed as the ECB going soft on its mandate”.

The Eurozone CPI (final estimate) for December is due today and likely moderated to 9.2% y/y, from 10.1% y/y in November.
The preliminary ready for core CPI surprised to the upside in December, which adds to the ECB’s concerns about the persistence of inflation.

The UK CPI for December is due out today and is expected at 10.5% y/y, from 10.7% y/y in November.
The fall in fuel prices at the end of last year may have been the main driver.
Goods inflation is expected to have eased in December, while services inflation is expected to have increased again.
Core CPI is expected to have eased to 6.2% y/y, from 6.3% y/y.
Headline CPI is expected to ease this year due to favourable base effects.

Locally, the CPI for December is in the spotlight today; CPI likely moderated to 7.3% y/y in December, from 7.4% y/y in November.
Core CPI is expected though to have increased to 5.1% y/y in December, from 5.0% y/y in November.
Retail sales data for November is also due; expectations are for a decline of 0.6% y/y in November, the same as in October.
Eskom: Stage 4 loadshedding is currently in place until 4pm; Stage 5 loadshedding will resume then.
This may continue until further notice.

Brent crude oil is currently at $86.57/bbl; ($85.92/bbl*).
Gold is at $1897/oz ($1907/oz*).
SA CDS 254bps*, Brazil 244bps* and Turkey 566bps*.
Yields: US 10yr at 3.54%*, German bund at 2.09%* and SA 10-year generic at 10.55%*, SA’s R186 at 8.29%*.

* Denotes yesterday’s close.

Key events and data:

Read PDF