In the loop 21 September 2022

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is marginally stronger this morning, at R17.70/$, after closing weaker yesterday (R17.71/$*).
EM currencies were mixed yesterday; the BRL (+0.5%) and KRW (+0.3%) were the biggest gainers; the CLP (-1.1%), RUB (-0.9%) and CZK (-0.8%) were the biggest losers.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.

The spotlight is on the US FOMC interest rate decision later today.
The higher-than-expected reading for US CPI for August has cemented the case for a third straight 75 bps rate increase.
A 100 bps increase, however, cannot be ruled out.
Fed Chair Jerome Powell will likely signal that the FOMC is committed to keeping rates higher for longer.
Investors will keep an eye on Powell’s comments about the possibility of an economic downturn.
Investors are also looking beyond the inflation data for any signs that could see the bank scaling back the magnitude of rate increases.

ECB President Christine Lagarde commented yesterday that borrowing costs will likely rise more in the months ahead.
This is expected even after policymakers front-loaded initial moves.
Lagarde noted that the current tightening policy is “the fastest change in rates in our history”.
Policymakers are debating their next move in October following the Fed’s 75 bps increases.
Lagarde, however, is concerned about the level of the rate increases that would be appropriate as rising energy costs threaten to tip Europe into a recession.
Lagarde also reiterated that policy moves are data-dependent and that the ECB would make decisions on a meeting-by-meeting basis.

Brazil’s central bank has kept its Selic rate unchanged, at 13.75%, as expected, despite rising inflation.

Locally, the August CPI print is scheduled for release today; CPI is expected at 7.6% y/y, from 7.8% y/y in July.
On a m/m basis, CPI is expected to have increased by 0.1% in August, after having increased by 1.5% in July.
Core CPI is expected at 4.6% y/y in August, the same as in July.
Eskom continues with Stage 5 loadshedding today.

Brent crude oil is currently at $90.70/bbl; ($90.62/bbl*).
Gold is at $1662/oz ($1664/oz*).
SA CDS 294bps*, Brazil 263bps* and Turkey 750bps*.
Yields: US 10yr at 3.56%*, German bund at 1.92%* and SA 10-year generic at 11.01%*, SA’s R186 at 9.11%*.

* Denotes yesterday’s close.

Key events and data:

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