Closing the loop 23 May 2023

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is stronger at R19.17/$ (R19.24/$*) today; it ranged between R19.16/$ and R19.32/$.
The currency is above its 50-day, 100-day and 200-day moving averages (R18.43/$, R18.05/$ and R17.78/$).
EM currencies are mixed today; the KRW (+0.4%), ZAR (+0.4%) and RUB (+0.3%) were the biggest gainers; the THB (-0.7%), HUF (-0.7%) and MYR (-0.5%) were the biggest losers.

The rand is steady ahead of the April CPI data out tomorrow and the SARB’s interest rate decision on Thursday.
This follows the recovery yesterday after S&P ratings agency maintained the country’s sovereign rating and outlook over the weekend and on expectations that the SARB will hike the repo rate by 50 bps on Thursday.
Investors will therefore keep a close eye the April CPI data, out tomorrow, to assess the success of the SARB’s aggressive rate hiking cycle in trying to curb inflation.
The April CPI is expected at 7.0% y/y, from 7.1% y/y in March.
On a m/m basis, CPI is likely to have increased by 0.5% m/m in April after having increased by 1.0% m/m in March.
Core CPI is likely to have increased by 5.4% y/y in April from 5.2% y/y in March.

The SARB leading indicator for March slipped further to 117.8 from an upwardly revised 120.2 in February.
The largest detractors were decreases in South Africa’s export commodity price index denominated in USD and the six-months smoothed growth rate in the real M1 money supply.
The positive contributors were an increase in the number of residential building plans approved and an acceleration in the composite leading business cycle indicator for South Africa’s major trading-partner countries.
The coincident indicator, which measures current economic conditions, slipped to 96.1 in February from 96.4 in January.
The lagging indicator decreased to 101.4 in February from 103.0 in January.

Eskom: Stage 5 loadshedding continues until 5am tomorrow; Stage 3 loadshedding will resume then.
Eskom continues to warn that the current schedule could change at short notice.

The Eurozone S&P Global composite PMI slipped more than expected to 53.3 in April from 54.1 in March.
The deterioration comes on the back of the further decline in the manufacturing PMI, which fell to 44.6 in April from 45.8 in March.
The services PMI also slipped in April but remained in expansionary territory; the services PMI came in 55.9 in April from 56.2 in March.
The UK composite PMI also decreased in April, albeit remained in expansionary territory, to 53.9 from 54.9 in March.
The fall was driven by decreased activity in the manufacturing sector; the manufacturing PMI fell to 46.9 in April from 47.8 in March.
The services PMI also remained in expansionary territory with the index at 55.1 in April from 55.9 in March.
The data suggests that companies are still relatively confident about the outlook for the economy despite higher interest rates and inflation.

The UK’s BOE Governor Andrew Bailey commented today that inflation in the UK had been on the rise even prior to the Russia-Ukraine war.
Chief Economist Huw Pill noted that policymakers’ modelling needed to change given the “unexpected persistence of inflation in the aftermath of a series of shocks, from Covid to the energy price crisis”.

Brent crude oil is at $77.06/bbl ($75.99/bbl*).
Gold price is at $1969/oz ($1974/oz*).
SA CDS is at 320bps (316bps*), Brazil 215bps (216bps*), Turkey 699bps (695bps*).
Yields: US 10yr 3.73% (3.71%*), German bund at 2.48% (2.45%*) and SA 10-year generic at 12.08% (12.06%*), SA’s R2030 is at 11.23% (11.22%*).
The JSE ALSI is down by 1.3% today (-0.3%*).

* Denotes yesterday’s close.

Key events and data:

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