Closing the loop 05 August 2022

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is weaker at R16.81/$ (R16.65/$*) today; it ranged between R16.55/$ and R16.87/$.
The currency is above its 50-day, 100-day and 200-day moving averages (R16.33/$, R15.83/$ and R15.66/$).
EM currencies are mixed today; the RUB (+2.0%), THB (+1.3%) and KRW (+0.9%) are the biggest gainers; the COP (-1.2%), ZAR (-1.0%) and COP (-1.0%) are the biggest losers.

US non-farm payrolls for July significantly overshot expectations and increased by 528k from an upwardly revised increase of 398k in June.
Payrolls increased in accommodation and food services, health care and professional and business services.
The unemployment rate fell to 3.5% in July, matching a five-decade low, from 3.6% in June.
Wage growth accelerated in July while the labour force participation rate eased during the month.
The data signals strong labour demand despite the economy slowing.
The data may also give the Fed reason to continue with its steep interest rate increases to try and curb inflation.
Fed Chair Jerome Powell indicated last week that the Fed could raise rates by 75 bps for a third time at their next meeting in September.

BOE Governor Andrew Bailey has rejected accusations that the central was too slow in raising interest rates.
The governor warned yesterday that inflation is likely to peak at 13.3% in October.
The UK’s business and energy secretary has since suggested that the BOE has not done enough to bring down inflation.
The secretary noted that the bank should have acted sooner and that employing the current policy will not likely fix the problem.
He expressed concern that the UK would have the slowest growth of any of the G7 economies next year, according to the IMF.

A UK report by an insolvency specialist has indicated that the number of UK businesses in “critical financial distress” has increased by more than a third over the past year.
The report cited higher labour, material and energy prices, as well as the withdrawal of government-backed Covid support programmes as strains on businesses.
It was reported that 1,957 UK businesses were in critical financial distress in Q2:22, up 37% y/y.

Locally, the SARB’s gross reserves increased to $59.51bn in July from $58.92bn in June.
Net reserves slipped marginally to $53.74bn in July from R53.81bn in June.
Eskom will implement Stage 2 loadshedding over the weekend from 4pm to midnight.

Brent crude oil is at $95.96/bbl ($94.12/bbl*).
Gold price is at $1777/oz ($1790/oz*).
SA CDS is at 277bps (269bps*), Brazil 271bps (273bps*), Turkey 736bps (729bps*).
Yields: US 10yr at 2.83% (2.68%*), German bund at 0.93% (0.80%*) and SA 10-year generic at 10.74% (10.67%*), SA’s R186 is at 8.90% (8.82%*).
The JSE ALSI is up by 1.0% today (+0.2%*).

* Denotes yesterday’s close.

Key events and data:

Read PDF