Closing the loop
- The rand is weaker at R17.73/$ (R17.68/$*) today; it ranged between R17.62/$ and R17.81/$.
- The currency is above its 50-day, 100-day and 200-day moving averages (R16.95/$, R16.47/$ and R15.87/$).
- EM currencies are mixed today; the KRW (+0.3%) and HUF (+0.1%) are the biggest gainers; the CZK (-0.8%), PLN (-0.6%) and RON (-0.4%) are the biggest losers.
- The Swedish Riksbank hiked its key rate by 100 bps, its biggest rate increase since 1992, today to 1.75%.
- The Riksbank noted that inflation is too high and “is undermining households’ purchasing power”.
- It is also making it increasingly harder for companies and households to plan their finances.
- The central bank expects interest rates to continue rising over the next 6 months as the bank tries to tame inflation towards target levels.
- Following the higher-than-expected rate hike by the Riksbank, investors are now focused on the US FOMC interest rate decision tomorrow.
- While debate has recently shifted to the possibility of an even more aggressive rate hike, the Fed is expected to hike the Fed funds rate by 75 bps.
- Brazil’s central bank also meets tomorrow; it is expected to keep the Selic rate unchanged at 13.75%.
- US housing starts increased unexpectedly in August, by 12.2% m/m to 1.58 million from a downwardly revised 1.4 million in July.
- The increase was driven by an increase in multi-family homes.
- A decline in building permits in August, however, suggests that higher mortgage rates are weighing on demand.
- Builders have become increasing pessimistic in their assessment of the housing market.
- US existing homes sales for August are due out tomorrow; another m/m decline is expected.
- Locally, the SARB’s leading indicator for July slipped to 126.2 from an upwardly revised 127.5 in June.
- The largest detractors were a decrease in the number of residential building plans approved and a decline in the composite leading business cycle indicator for SA’s main trading partner countries.
- The largest positive contributors were an increase in the 6-month smoothed growth rate in new passenger vehicle sales as well as widening of the interest rate spread.
- The coincident indicator, which measures current economic conditions, slipped, albeit marginally, to 97.5 in June from 97.6 in May.
- The lagging indicator remained unchanged at 97.6 in June.
- The August CPI print is scheduled for release tomorrow; CPI is expected at 7.6% y/y, from 7.8% y/y in July.
- On a m/m basis, CPI is expected to have increased by 0.1% in August, after having increased by 1.5% in July.
- Eskom continues with Stage 5 loadshedding this evening.
- The oil price is down by 1.9% today, and up by 16.1% in the year-to-date.
- The gold price is down by 0.4% today, and down by 9.0% in the year-to-date.
- Brent crude oil is at $90.41/bbl ($92.00/bbl*).
- Gold price is at $1664/oz ($1670/oz*).
- SA CDS is at 293bps (276bps*), Brazil 262bps (247bps*), Turkey 745bps (747bps*).
- Yields: US 10yr at 3.58% (3.49%*), German bund at 1.94% (1.80%*) and SA 10-year generic at 11.03% (10.92%*), SA’s R186 is at 9.13% (9.07%*).
- The JSE ALSI is up by 0.2% today (-0.2%*).
* Denotes yesterday’s close.
Key events and data:
- 10h00: SA CPI (August)
- 13h00: US MBA mortgage applications (16 September)
- 16h00: US existing home sales (August)
- 20h00: US FOMC interest rate decision – 75 bps hike expected