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In the loop 25 May 2023

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R19.31/$, after closing weaker yesterday (R19.25/$*).
  • EM currencies were mixed yesterday; the MXN (+0.9%), COP (+0.7%) and HUF (+0.5%) were the biggest gainers; the PLN (-0.6%), CLP (-0.6%) and MYR (-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 minutes of the US FOMC meeting (2-3 May) noted Fed policymakers as leaning towards pausing rate increases at the FOMC meeting in June.
  • Policymakers, however, signalled that they aren't ready to call an end to the inflation fight
  • The minutes further showed policymakers as uncertain about how much additional tightening would be needed.
  • They weighed the slower-than-expected progress of inflation and the resilient US labour market against the likelihood of a credit crunch.
  • US Governor Christopher Waller commented yesterday that he does not support a pause on rate hikes “unless we get clear evidence that inflation is moving down towards our 2% objective”.
  • Waller further said that the June interest rate decision would depend on the data over the next three weeks.
  • Atlanta Fed President Raphael Bostic too favours a data-dependent approach.
  • The US Q1:23 GDP data is due out today; a softening in economic activity is expected.
  • GDP is forecast at 1.1% q/q for Q1:23, from 2.6% q/q in Q4:22.
  • Fitch ratings agency has placed the US’s AAA rating on watch for a possible downgrade as talks to resolve the debt ceiling issue drag on with no sign of a deal.
  • Fitch said that the decision reflected “increased political partisanship that is hindering reaching a resolution” on the debt ceiling. 
  • However, House Speaker Kevin McCarthy remains optimistic of a timely deal.
  • The Central Bank of Turkey today is expected to hold its one-week repo rate at 8.5% today despite inflation being above 40%.
  • The central bank will likely use banking regulation and practices to curb pressure on the lira from its accommodative policy stance.
  • Locally, the SARB MPC interest rate decision is expected today; the SARB is largely expected to hike the repo rate by 50 bps, to 8.25%.
  • The PPI for April, also scheduled for release today, is expected at 9.0% y/y, from 10.6% y/y in March. 
  • Eskom: Stage 4 loadshedding is currently in place until 4pm; Stage 5 loadshedding will be implemented then.
  • Brent crude oil is down this morning, and down by 8.9% year-to-date.
  • The gold price is down this morning, and up by 7.3% year-to-date.
  • Brent crude oil is currently at $78.27/bbl; ($78.36/bbl*).
  • Gold is at $1957/oz ($1959/oz*).
  • SA CDS 320bps*, Brazil 217bps* and Turkey 672bps*.
  • Yields: US 10yr at 3.74%*, German bund at 2.47%* and SA 10-year generic at 11.91%*, SA’s R2030 at 11.02%*.

* Denotes yesterday’s close. 

 Key events and data: 

  • 11h30: SA PPI (April)
  • 14h30: US initial jobless claims (20 May), GDP (Q1:23)
  • 15h00: SA SARB MPC interest rate decision – 50 bps rate hike expected

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