Closing the loop

Market highlights:

• The rand is stronger at R18.41/$ (R18.44/$*) today; it ranged between R18.27/$ and R18.50/$.
• The currency is above its 50-day, 100-day and 200-day moving averages (R17.72/$, R17.54/$ and R17.31/$).
• EM currencies are mixed today; THB (+0.6%), BGN (+0.3%) and CZK (+0.3%) are the biggest gainers; the MXN (-0.7%), KRW (-0.7%) and RUB (-0.5%) are the biggest losers.

• The European Central Bank (ECB) has hiked its benchmark interest rate by 50 bps to 3.5% despite market turmoil on the back of the SVB collapse.
• The MPC noted that inflation is too high and that the bloc’s banks are robust.
• The committee, however, failed to give guidance on its future policy path, a sign that the bank is unsure how much further they will increase borrowing costs.
• The ECB said that policymakers were “monitoring current market tensions closely.”
• It also said that the bank is ready to respond, if necessary to “preserve price stability and financial market stability in the euro area”.

• Former Fed Vice Chair Richard Clarida commented that today’s ECB policy decision will have implications for the Fed’s policy decision next week.
• The narrative has shifted from how much the Fed is likely to hike rates by next week to whether a pause is likely.
• The Fed meets next week; traders are evenly split on whether the Fed will raise rates.

• US housing starts exceeded expectations and increased in February for the first time in six months.
• Housing starts increased by 9.8% m/m to 1450k in February after having declined by 2.0% m/m (1321k) in January.
• The data is consistent with the expectation that the housing market has troughed.

• Locally, the BER’s inflation expectations of analysts, business people and trade unions increased for 2023 and 2024 by 0.2 pps compared to the Q4:22 survey.
• Inflation is expected to average 6.3% in 2023, 5.8% in 2024 and 5.5% in 2025.
• While analysts see inflation averaging 4.6% (close to the mid-point of the inflation target) in 2025, trade unionists see inflation averaging just below the upper limit of the target in 2025 at 5.8%.
• Business people expect an average of 6.2% (above the upper limit of the target band) in 2025.
• Average 5-year inflation expectations remained steady at 5.5%.
• Eskom: Stage 3 loadshedding continues until further notice.
• Minister of Defence Thandi Modise has warned that the SA army will be on standby for the planned national shutdown by the EFF on Monday.
• Police Minister Bheki Cele has indicated that business would continue as per usual on Monday, despite the planned mass protests.

• The oil price is down by 2.2% today, and down by 16.2% in the year-to-date.
• The gold price is up by 0.1% today, and up by 5.6% in the year-to-date.

• Brent crude oil is at $71.99/bbl ($73.69/bbl*).
• Gold price is at $1926/oz ($1924/oz*). 
• SA CDS is at 290bps (291bps*), Brazil 251bps (248bps*), Turkey 552bps (558bps*).
• Yields: US 10yr 3.43% (3.45%*), German bund at 2.17% (2.13%*) and SA 10-year generic at 10.88% (10.88%*), SA’s R186 is at 8.41% (8.41%*).
• The JSE ALSI is down by 0.2% today (-2.8%*).

* Denotes yesterday’s close. 

Key events and data:

• 06h30: Japan Tertiary industry index (January)
• 12h00: Eurozone CPI (February – final)
• 13h00: OECD publishes Interim Economic Outlook
• 15h15: US industrial and manufacturing production (February), capacity utilisation (February)
• 16h00: US leading index (February), University of Michigan sentiment index, 1 yr and 5-10 yr inflation expectations (March)

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