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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 up this morning, and up by 0.8% year-to-date.
  • The gold price is down this morning, and up by 4.0% year-to-date.
  • 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: 

  • 09h00: UK CPI, PPI, RPI (December)
  • 10h00: SA CPI (December), retail sales (November)
  • 11h30: UK house price index (December)
  • 12h00: Eurozone CPI (December – final)
  • 13h00: SA retail sales (November)
  • 14h00: US MBA mortgage applications (13 January)
  • 15h30: US retail sales (December), PPI (December)
  • 16h15: US industrial production, manufacturing production (December)
  • 17h00: US business inventories (November), NAHB housing market index (January)
  • 21h00: US Fed Beige book

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