In the loop

What you should know this morning:

• The rand is stronger this morning, at R16.45/$, after closing weaker yesterday (R16.52/$*).
• EM currencies were mixed yesterday; the COP (+0.9%), INR (+0.7%) and ARS (+0.5%) were the biggest gainers; the KRW (-0.8%), ZAR (-0.4%) and RON (-0.4%) were the biggest losers.
• Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.

• Iran war: talks between the US and Iran remain deadlocked, with key disagreements focused on Iran's uranium stockpile, the future of the Strait of Hormuz, and the continuation of the US naval blockade of Iranian ports. 
• President Trump said he was “in no hurry” to finalise a deal.
• He said that the US maintained “total control” over the Strait and would prevent Iran from obtaining nuclear weapons.

• The UK's GfK consumer confidence index improved slightly in May, to -23, from -25 in April. 
• The improvement suggests that households became somewhat less pessimistic despite ongoing economic uncertainty and concerns linked to the Iran war. 
• Measures of personal finances and the broader economic outlook showed some improvement.
• The index tracking willingness to make major purchases weakened further; confidence in savings also fell sharply.
• Overall, the data indicated that, while sentiment stabilised somewhat in May, consumers remained cautious about the economic outlook and their spending plans.

• UK retail sales for April are scheduled for release today and are expected to have declined by 0.6% m/m, after having increased by 0.7% m/m in March.
• On a y/y basis, sales are likely to have increased by 1.3% in April, though down from 1.7% y/y in March. 

• Eurozone consumer confidence index improved modestly in May, to -19.0, from -20.6 in April, beating expectations for a further decline.
• The improvement suggests that household sentiment stabilised somewhat after weakening sharply in recent months.
• However, confidence remains deeply negative and well below long-term averages.
• The May data highlighted ongoing concerns about high energy prices, inflation, and the economic impact of the Iran war.  
• Germany's May Ifo business climate survey, due out today, should provide further insight into the drag from higher energy prices on the near-term growth outlook.

• Richmond Fed President Tom Barkin noted that the ability of businesses and consumers to absorb repeated supply shocks would determine whether the Fed can continue to “look through” elevated inflation without raising rates. 
• He urged policymakers to consider whether successive waves of supply-driven price pressures would risk de-anchoring inflation expectations. 
• He noted that the outlook ultimately depends on how much strain businesses, households and inflation expectations can withstand.
• Barkin added that he is increasingly concerned that the US may be entering an era of more frequent supply shocks, driven by geopolitical tensions, trade fragmentation, extreme weather, and rising government debt. 
• Despite these risks, he said that the Fed's current policy stance remains “well positioned” to manage uncertainty.

• Chicago Fed President Austan Goolsbee commented yesterday that he remains concerned that inflation pressures are becoming broader and more persistent. 
• He warned that inflation is no longer being driven only by energy prices and tariffs but is increasingly spreading into services categories. 
• Goolsbee noted that the recent rise in services inflation was particularly troubling because it may point to underlying price pressures that are proving harder to contain.
• He added that the Fed needs to see clearer evidence that inflation is moving sustainably back towards the 2% target before considering interest rate cuts. 
• While Goolsbee noted that the labour market remains relatively stable, he stressed that persistent inflation continues to complicate the Fed's policy outlook.

• The final University of Michigan consumer sentiment index is expected to have remained unchanged, at 48.2, in May.

• Locally, it's a quiet day as far as data releases are concerned.

• Brent crude is up this morning, and up by 71.4% year-to-date.
• The gold price is down this morning, and up by 4.8% year-to-date.

• Brent crude oil is currently at $104.28/bbl; ($102.58/bbl*).
• Gold is at $4526/oz ($4543/oz*).
• SA CDS 144bps*, Brazil 123bps* and Turkey 252bps*.
• Yields: US 10yr at 4.56%*, German bund at 3.09%*, SA 10-year generic at 8.93%*, SA's R2035 at 8.75%*.

* Denotes yesterday's close.

Key events and data:

• 08h00: UK retail sales (April)
• 11h00: Eurozone negotiated wages (Q1:26)
• 16h00: US University of Michigan consumer sentiment, 1 yr and 5-10 yr inflation expectations (May – final)

Read PDF