In the loop

What you should know this morning:

• The rand is stronger this morning, at R17.19/$, after closing weaker yesterday (R17.20/$*).
• EM currencies were mixed yesterday; the ARS (+0.7%), PEN (+0.5%) and RUB (+0.2%) were the biggest gainers; the PHP (-0.5%), PLN (-0.5%) and BRL (-0.5%) were the biggest losers.
• Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.

• ECB Governing Council Jose Luis Escriva has warned of an unprecedented level of global uncertainty, citing geopolitical tensions, volatile markets, lingering effects from past crises, and the war in Ukraine.
• He emphasised that growth risks in the Eurozone remain tilted to the downside.
• He urged policymakers to exercise caution in their monetary policy decisions.
• Escriva stressed the importance of the ECB remaining agile and ready to revise its forecasts, should economic conditions deteriorate.
• Despite recent inflationary pressures, he noted that the ECB’s central scenario continues to project inflation hovering around its 2% target. 

• US Fed Chair Jerome Powell delivered comments yesterday at the Community Bank Conference in Washington but did not comment on monetary policy.
• This comes amid a backdrop of heightened uncertainty caused by the ongoing US government shutdown, which has paused the release of key economic data such as inflation and employment figures.
• The absence of this data has left policymakers and markets navigating the current environment without the benefit of all the relevant information.
• Markets are largely pricing in a rate cut later this month.
• However, the Fed chair has previously stated that the Fed is “not on any preset course” regarding interest rate reductions and remains committed to supporting maximum employment and bringing inflation toward its 2% target.

• The US Bureau of Labor Statistics (BLS) has recalled some staff to work, despite the ongoing government shutdown, in order to publish the key inflation report for September.
• The CPI data, originally scheduled for release on 15 October, is essential for calculating social security payments, which are directly tied to inflation figures.
• The decision to bring workers back ensures that this critical data will not be delayed significantly despite broader disruptions caused by the shutdown.

• Fed Governor Michael Barr yesterday called for a cautious approach to further interest rate cuts. 
• He warned that tariffs could lead to more persistent inflation.
• He noted that the Fed faces a difficult balancing act as policymakers must consider the risks of both rising inflation and weakening employment. 
• Barr urged patience in adjusting policy, emphasising the need for more data before taking additional steps.
• While the immediate impact of President Trump’s tariff policies on inflation has been smaller than expected, he cautioned that price pressures could still emerge as firms look to restore profit margins.

• Locally, it is a quiet day as far as data releases are concerned.

• Brent crude is down this morning, and down by 12.9% year-to-date.
• The gold price is down this morning, and up by 51.4% year-to-date.

• Brent crude oil is currently at $64.99/bbl; ($64.98/bbl*).
• Gold is at $3973/oz ($3976/oz*).
• SA CDS 165bps*, Brazil 141bps* and Turkey 259bps*.
• Yields: US 10yr at 4.13%*, German bund at 2.70%*, SA 10-year generic at 9.15%*, SA’s R2035 at 9.03%*.

* Denotes yesterday’s close.

Key events and data: 

• 16h00: US University of Michigan sentiment, 1 yr and 5-10 yr inflation expectations (October)

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