In the loop

What you should know this morning:

• The rand is weaker this morning, at R16.34/$, after closing stronger yesterday (R16.29/$*).
• EM currencies were mixed yesterday; the ZAR (+1.0%), HUF (+0.9%) and THB (+0.6%) were the biggest gainers; the IDR (-0.2%) was the biggest loser.
• Asian equity markets are mixed this morning; the Nikkei and Shanghai Composite are down, while the Hang Seng is up.

• Iran war: Iran and the US agreed yesterday on a framework for a deal aimed at ending their more than two-month-long conflict.
• However, the proposed memorandum of understanding provides few details on how the Strait of Hormuz will be managed.
• Discussions reportedly focused on reopening the waterway roughly 30 days after a formal agreement is reached.
• Despite this progress, the US carried out strikes on Iranian vessels in the Strait, adding a layer of complexity to the situation.
• Tehran's immediate response to the renewed hostilities remains unclear.
• However, any further escalation would risk undermining the fragile peace negotiations, particularly given repeated warnings from Iranian officials against further US attacks.

• ECB Governing Council member Francois Villeroy de Galhau yesterday commented that the ECB has not yet seen clear evidence of second-round inflation effects stemming from the recent surge in energy prices. 
• He noted that underlying inflation remains relatively well contained. 
• He noted that the impact of higher energy costs has not yet spread broadly across wages, goods and services prices. 
• However, Villeroy stressed that the ECB must remain vigilant and ready to act if signs emerge that the energy shock is feeding into more persistent inflation pressures. 
• He reiterated that policymakers would remain data-dependent and closely monitor inflation expectations, wage developments and core price dynamics before considering further policy tightening.

• The US FHFA house prices index for March is expected to have increased by 0.1% m/m, after having stagnated in February.
• The US S&P CoreLogic Case-Shiller home price index for March is due for release today and is expected to show a slight increase in house price growth.
• The Conference Board's consumer confidence index for May is also on the cards today.
• The consumer sentiment index is likely to have declined to 92.0 in May, from 92.8 in April. 
• Higher gasoline prices, persistent inflation, and uncertainty linked to the ongoing war in Iran are weighing on sentiment.

• Locally, the SARB leading indicator for March is due for release today; the leading indicator increased to 120.2 in February, from 119.6 in January.
• The largest positive contributors were an increase in the number of residential building plans approved and the SA USD-denominated export commodity price index in February.
• The largest negative contributors were a decrease in the volume of domestic orders received in the manufacturing sector and a deceleration in the 6m smoothed growth rate in job advertisements.

• Oil prices are up this morning after reports that the US had carried out new attacks against Iran.
• This offsets hopes that a deal to open the Strait of Hormuz was close.
• Brent crude is up this morning, and up by 61.7% year-to-date.
• The gold price is down this morning, and up by 4.9% year-to-date.

• Brent crude oil is currently at $98.38/bbl; ($96.14/bbl*).
• Gold is at $4530/oz ($4570/oz*).
• SA CDS 141bps*, Brazil 120bps* and Turkey 252bps*.
• Yields: US 10yr at 4.55%**, German bund at 2.94%*, SA 10-year generic at 8.67%*, SA's R2035 at 8.50%*.

* Denotes yesterday's close.

** Denotes Friday's close.

Key events and data:

• 09h00: SA SARB leading indicator (March)
• 14h15: US ADP weekly employment change (9 May)
• 15h00: US FHFA house price index (March), S&P Cotality house price index (March)
• 16h00: US Conference Board consumer confidence index (May)

Read PDF