Closing the loop

Market highlights:

• The rand is stronger at R17.01/$ (R17.03/$*) today; it ranged between R16.90/$ and R17.06/$.
• The currency is below its 50-day and 100-day moving averages (R17.84/$ and R17.38/$) and above its 200-day moving average (R16.42/$).
• EM currencies are mixed today; the MYR (+1.8%), KRW (+1.8%) and THB (+1.4%) are the biggest gainers; the ARS (-0.2%) is the biggest loser.

• The ECB MPC minutes of the November meeting noted that a few policy members preferred a 50 bps hike rather than 75 bps.
• The minutes highlighted that the governing council “should continue normalising and tightening policy”.
• A pause might be necessary if there is a “prolonged and deep recession”.

• BOE Deputy Governor Dave Ramsden commented today that the central bank may have to cut rates if the UK economy falls into a long recession.
• Ramsden noted that if households and businesses came under greater financial pressure than expected, he would consider the case for rate cuts as appropriate.
• The BOE has hiked rates at 8 consecutive meetings to 3.0%. 

• Locally, the SARB hiked the repo rate by 75 bps to 7.00%; 3 members preferred a 75 bps increase while 2 members preferred a 50 bps increase.
• The level of the repo rate is now above pre-pandemic levels.
• The bank expects CPI to average 6.7% (previously 6.5%) in 2022 while CPI in 2023 is expected at 5.4% (from 5.3%) and 4.5% (previously 4.6%) in 2024.
• The bank assesses the risks to inflation to be to the upside; this comes on the back of the Russia-Ukraine war which is having an adverse impact on global prices generally
• The oil price market is expected to remain tight with upside risks to prices; local food price inflation is also a risk.
• Given high petrol and food prices and the assumption of public sector wage restraint, the forecast for average salaries have risks to the upside.
• Overall inflation is expected to be at the mid-point of the target range in 2024.
• GDP is pencilled in at 1.8% (previously 1.9%) in 2022; 1.1% (previously 1.4%) is pencilled in for 2023 and 1.4% (previously 1.7%) for 2024.
• The forecasts consider lower commodity prices, higher inflation and interest rates.
• On the supply-side the forecasts incorporate increased loadshedding which could cut 0.6 percentage points from growth in 2023.
• The risks to the growth outlook are assessed to the downside; negative global shocks and loadshedding remain headwinds to growth.
• The output gap is larger in the near term before closing in Q3:23.
• In this uncertain environment future policy changes are likely to be data dependent and sensitive to the balance of risks to the outlook.
• The MPC will continue to look through temporary shocks and concentrate on potential second-round effects and the risk of de-anchoring inflation expectations.
• The governor noted that the QPM model remains a broad policy guide which changes from one meeting to the next in response to new data and risks.
• The bank further noted that economic and financial conditions are expected to remain more volatile for the foreseeable future. 

• The October PPI moderated to 16.0% y/y from 16.3% y/y in September.
• On a m/m basis, PPI was up 0.4% in October after having increased by 0.7% in September.
• Eskom has reduced loadshedding to Stage 3 until 5am tomorrow; Stage 2 will be implemented at 5am tomorrow until 4pm.
• This pattern is expected until further notice.

• The oil price is down by 0.6% today, and up by 9.2% in the year-to-date.   
• The gold price is up by 0.7% today, and down by 4.0% in the year-to-date.

• Brent crude oil is at $84.90/bbl ($85.41/bbl*).
• Gold price is at $1755/oz ($1743/oz*). 
• SA CDS is at 249bps (249bps*), Brazil 262bps (261bps*), Turkey 554bps (555bps*).
• Yields: US 10yr at 3.69% (3.69%*), German bund at 1.85% (1.93%*) and SA 10-year generic at 10.70% (10.78%*), SA’s R186 is at 8.56% (8.65%*).
• The JSE ALSI is up by 0.5% today (+0.9%*).

* Denotes yesterday’s close. 

Key events and data:

• 01h50: Japan PPI services (October)

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