In the loop 11 August 2022

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R16.23/$, after closing stronger yesterday (R16.18/$*).
EM currencies were mixed yesterday; the ZAR (+2.6%), COP (+1.8%) and CZK (+1.7%) were the biggest gainers; the THB (-0.5%), KRW (-0.5%) and IDR (-0.1%) were the biggest losers.
Asian equity markets are mixed this morning; the Nikkei is down, while the Hang Seng and Shanghai Composite are up.

US equities and government bonds rallied yesterday after the July CPI data showed that inflation came in less than expected.
US CPI came in at 8.5% y/y in July, from 9.1% y/y in June.
This now has raised hopes somewhat that the Fed might temper hiking rates aggressively to tame inflation.

Minneapolis Fed President Neel Kashkari commented yesterday that the Fed needs to continue hiking rates and keep it elevated until inflation starts to ebb.
Kashkari noted that the idea of cutting rates next year when inflation is expected to slow is unrealistic at this stage.
He noted that it’s more likely that the Fed would raise rates to a point, then hold it there until inflation is convincingly retreating to the 2%-target.
However, while inflation moderated in July, Kashkari commented that the Fed is “far from declaring victory on inflation”.
Indeed, Chicago Fed President Charles Evans too expects the Fed to tighten policy into next year to further curb inflation.
The July PPI is due out today.

In the UK, BOE Chief Economist Huw Pill noted that hiking interest rates in the UK to temper inflation will likely slow growth.
He nonetheless indicated that hiking rates further would be necessary to stabilise the UK economy in the longer term.
He also noted that it is important for the BOE to stick to its target of keeping inflation close to 2%.

SA mining and manufacturing production data for June will be released today.
Mining production is expected to have fallen by 5.0% y/y in June, from a 7.8% y/y decline in May.
Mining output is expected to have increased by 0.4% m/m in June, from May’s 0.7% m/m increase.
Manufacturing production is likely to have contracted by 3.0% y/y in June, following a contraction of 2.3% y/y in May.
Output is expected to have fallen on a m/m basis, too, by 0.6% in June, from a decline of 0.2% in May.

Both the International Energy Agency (IEA) and OPEC will publish their monthly oil market reports today.
Brent crude oil is down this morning, and up by 24.7% year-to-date.
The gold price is down this morning, and down by 2.4% year-to-date.

Brent crude oil is currently at $96.97/bbl; ($97.40/bbl*).
Gold is at $1785/oz ($1798/oz*).
SA CDS 245bps*, Brazil 254bps* and Turkey 686bps*.
Yields: US 10yr at 2.79%*, German bund at 0.89%* and SA 10-year generic at 10.54%*, SA’s R186 at 8.62%*.

* Denotes yesterday’s close.

Key events and data:

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