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 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:

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