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In the loop 23 January 2023

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is stronger this morning, at R17.09/$, after closing stronger on Friday (R17.13/$*).
  • EM currencies were mixed yesterday; the COP (+1.8%), CLP (+1.3%) and ZAR (+0.2%) were the biggest gainers; the BRL (-0.6%), KRW (-0.3%) and ARS (-0.2%) were the biggest losers.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.
  • The Eurozone PMI and Germany’s Ifo survey for January are due this week and will provide an indication of growth at the start of 2023
  • Concerns over a deep slump in Q1:23 are dissipating as the risk of an energy crunch recedes; there are also signs that inflation has peaked.
  • The ECB’s Klaas Knot called for a 50 bps rate hike in both February and March.
  • Knot noted that the time to slow tightening is "still far away” and that 50 bps rate hikes "will be the pace for a multiple number of meetings". 
  • ECB President Christine Lagarde is among ECB speakers commenting on monetary policy and the economy today.
  • UK PMI data for January is also due out this week.
  • The BOE is also to hike rates by 50 bps in February.  
  • The Fed enters the blackout period ahead of its 31 January FOMC meeting; markets have priced in a 25 bps rate hike.
  • Upcoming data this week could support that market view.
  • The core PCE deflator on Friday, the Fed’s preferred inflation gauge, is expected to come in softer for December. 
  • Inflation expectations for January, due out on Friday, are expected to have fallen. 
  • Personal spending, retail sales and industrial production data releases are due out this week. 
  • Locally, the SARB’s leading indicator for December is scheduled for release tomorrow.
  • The December PPI, due out on Thursday, is expected to have moderated to 14.2% y/y, from an increase of 15.0% y/y in November.
  • The SARB MPC will meet this week to decide on rates; we expect the SARB to hike the repo rate by 25 bps. 
  • The Bloomberg consensus is for the bank to hike rates by 50 bps.
  • Eskom: loadshedding has been downgrade to Stage 2; Stage 4 loadshedding will commence at 4pm until 5am tomorrow.
  • President Ramaphosa had appealed to Eskom’s board to suspend its 18.65% tariff hike.
  • This comes following the announcement that SA may face two years of persistent blackouts as it overhauls its aging power stations.
  • Ramaphosa commented that it would not be fair to impose the tariff while there is loadshedding.
  • Nersa is due to have a board meeting this week to discuss concerns raised about the recent electricity tariff increase it granted to Eskom.
  • Brent crude oil is down this morning, and up by 1.7% year-to-date.
  • The gold price is up this morning, and up by 5.7% year-to-date.
  • Brent crude oil is currently at $87.35/bbl; ($87.63/bbl*).
  • Gold is at $1928/oz ($1926/oz*).
  • SA CDS 262bps*, Brazil 248bps* and Turkey 562bps*.
  • Yields: US 10yr at 3.47%*, German bund at 2.17%* and SA 10-year generic at 10.49%*, SA’s R186 at 8.25%*.

* Denotes Friday’s close. 

 Key events and data: 

  • 17h00: Eurozone consumer confidence (January)
  • 17h00: US leading index (December)

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