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In the loop 26 May 2023

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is stronger this morning, at R19.75/$, after closing weaker yesterday (R19.79/$*).
  • EM currencies were mixed yesterday; the RUB (+0.5%), PEN (+0.1%) and TWD (+0.1%) were the biggest gainers; the ZAR (-2.7%), BRL (-1.6%) and COP (-0.9%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei is up, while the Hang Seng and Shanghai Composite are down.
  • US negotiators seem to be moving closer to a deal that would raise the debt limit and cap federal spending for two years.
  • This could see defence outlays rise 3% next year, in line with US President Joe Biden’s budget request.
  • House speaker Kevin McCarthy noted that they still have a lot of ground to cover before reaching an agreement on averting an approaching US debt default.
  • Boston Fed President Susan Collins indicated yesterday that the Fed may have reached, or be approaching, a point at which it can pause rate increases.
  • Collins noted that while inflation is still too high, there are some promising signs of a moderation in prices.
  • Collins favours a meeting-by-meeting approach in determining the next interest rate move.
  • Several policymakers have expressed that, even if the Fed paused at the June FOMC meeting, further policy tightening later this year might be needed to bring down inflation more meaningfully. 
  • Collins did not comment on her views about this option in her remarks.
  • April’s US personal consumption and spending data releases for April are due out today. 
  • The PCE deflator is expected to have increased by 0.3% m/m in April, from 0.1% m/m in March.
  • BOE policymaker Jonathan Haskel signalled his support for the central bank to hike rates further.
  • He noted that it is important to “lean against” the risk of inflation becoming embedded in the UK.
  • He noted that “as difficult as the economy’s current conditions are, embedded inflation would be worse”. 
  • Australian retail sales remained flat in April as the rising cost of living and high interest rates restrain consumer spending.
  • Most retail sectors saw a decline in sales, with only department stores and clothing reflecting gains as consumers spent ahead of the winter season.
  • Spending on food also remained relatively high amid steep food price inflation but dropped in April on a m/m basis.
  • Locally, it’s a quiet day as far as economic data releases are concerned.
  • Eskom: Stage 4 loadshedding is currently in place into 4pm; Stage 5 loadshedding will be implemented then.
  • Brent crude oil is down this morning, and down by 11.5% year-to-date.
  • The gold price is up this morning, and up by 6.9% year-to-date.
  • Brent crude oil is currently at $76.00/bbl; ($76.26/bbl*).
  • Gold is at $1949/oz ($1943/oz*).
  • SA CDS 321bps*, Brazil 213bps* and Turkey 673bps*.
  • Yields: US 10yr at 3.81%*, German bund at 2.52%* and SA 10-year generic at 11.99%*, SA’s R2030 at 11.10%*.

* Denotes yesterday’s close. 

 Key events and data: 

  • 14h30: US personal income and spending (April), PCE deflator (April), durable goods orders (April), advance goods trade balance (April)
  • 16h00: US University of Michigan sentiment, 1 yr and 5-10 yr inflation expectations (May – final)

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