In the loop 06 February 2025

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R18.56/$, after closing stronger yesterday (R18.52/$*).
EM currencies were mixed yesterday; the RUB (+1.7%), ZAR (+0.8%) and THB (+0.7%) were the biggest gainers; the BRL (-0.8%), INR (-0.4%) and COP (-0.4%) were the biggest losers.
Asian equity markets: the Nikkei, Hang Seng and Shanghai Composite are up.

Central bank watch: the BOE is due to meet today and is largely expected to cut its benchmark interest rate by 25 bps, to 4.5%.
The central bank is likely to acknowledge that the downside risks to the UK economy have intensified.
This could open the door to further rate cuts by the BOE.

The UK’s Decision Maker Panel 3m and 1yr inflation expectations for January are due out today.
One-year ahead inflation expectations are expected to have remained unchanged, at 3.0%, in January.
The 3m ahead inflation expectations is expected to come in at 3.9% in January, from 3.8% in December.

ECB Chief Economist Philip Lane commented yesterday that the central bank should remain “agile” with regard to monetary policy.
This comes as he noted both upside and downside risks to inflation.
Lane warned that it could take longer than expected for the bank to achieve the bank’s 2% inflation this year.
He added that “an overly cautious approach could lead to below-target inflation”.
Lane suggested that a middle path may be more appropriate as the bank balances the risks of moving too quickly or too slowly.

The US ISM services index came in lower than expected in January, at 52.8, from 54.0 in December.
This slippage was driven by decreased demand amid bad weather and uncertainty around import tariffs.
The data implies the services industry remains wary of policies under the Trump administration.
The ISM manufacturing index for January, released earlier this week, increased to 50.9, from a revised 49.2 in December.
The data implied the US manufacturing sector as gathering momentum, albeit slowly.

Fed Vice Chair Philip Jefferson noted yesterday that long economic expansions have been shown to help reduce economic inequalities.
He cited the benefits of a "high pressure" labour market for workers.
Jefferson also remarked that high inflation erodes the benefits of a “hot” labour market.
He highlighted that the costs of inflation vary across groups, hurting lower-income groups more.

Locally, President Cyril Ramaphosa will deliver the State of the Nation Address (SONA) under the Government of National Unity (GNU) later today.
The electricity production and consumption data for December are scheduled for today.

Brent crude oil is currently at $74.71/bbl; ($74.61/bbl*).
Gold is at $2869/oz ($2873/oz*).
SA CDS 201bps*, Brazil 174bps* and Turkey 254bps*.
Yields: US 10yr at 4.41%*, German bund at 2.36%*, SA 10-year generic at 10.37%*, SA’s R2035 at 10.38%*.

* Denotes yesterday’s close.

Key events and data:

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