In the loop 12 September 2024

In the loop

Christelle Grobler

What you should know this morning:

The rand is trading at R17.89/$ this morning, after closing stronger yesterday (R17.91/$*).
EM currencies were mixed yesterday; the MXN (+1.3%), PHP (+0.8%) and PEN (+0.7%) gained the most; the RUB (-0.6%), PLN (-0.4%) and CZK (-0.2%) lost the most.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up this morning.

Central bank watch: the ECB will meet today and is largely expected to cut rates by 25bps.
This will bring the deposit facility rate down to 3.50%, from 3.75%.
However, as the bank announced in March, effective 18 September it will lower the spread between the main refinancing rate as well as the marginal lending facility rate and the deposit facility rate to 15bps.
This will be implemented by lowering the main refinancing rate and the marginal lending facility rate by 35bps each, irrespective of the outcome of today’s meeting.
Provided that the expected 25bps cut is announced today, this would bring the bank’s key main refinancing rate down 60bps, to 3.65%, from 4.25%, and the marginal lending facility rate to 3.90% (from 4.50%).

Japan’s PPI inflation came in lower than expected for August.
The PPI dipped 0.2% m/m in August, down from an upwardly increase of 0.5% m/m (previously 0.3% m/m) in July.
This was the first decline in 10 months, and came on the back of energy-related costs falling; the yen strengthened against the dollar last month.
In annual terms, PPI inflation recorded 2.5% in August, compared to 3.0% in July and expectations for 2.8%; this was the first slowdown in eight months.
The BOJ will meet on 20 September; the softness in the PPI will likely further dampen appetite to continue raising rates soon.

BOJ board member Naoki Tamura delivered a hawkish speech earlier this morning.
However, while indicating interest rate increases in due course, Tamura signalled that there is little need to react when the BOJ meets next week.
Tamura argued for the need to raise rates gradually from the current 0.25% to around the neutral interest rate level.
“I believe that we need to raise the short-term rate to at least around 1% in the second half of the bank’s projection period through fiscal 2026,” Tamura said.
“That’s needed to contain upside price risks and for achieving the stable and sustainable inflation target,” he added.

The UK RICS house price balance surprised on the upside by reaching 1% in August, up from -18% in July.
This was the first positive reading since October 2022.
The underlying indicators, such as agreed sales and price expectations, improved in August.

US PPI inflation data for August is due for release today.
PPI is expected to have increased 0.1% m/m in August, matching July’s rise.
In annual terms, PPI inflation likely decelerated to 1.7% in August, down from 2.2% in July.
Initial jobless claims for the week up to 7 September will also be released this afternoon.

Locally, today sees the release of Q3:24 surveyed inflation expectations as well as mining production data for July.
Surveyed inflation expectations have been decelerating but remain higher than the SARB’s inflation target.
A further deceleration in inflation expectations is likely given lower actual inflation prints recently.
The SARB will closely monitor the survey results as input to the upcoming MPC meeting next week.
Mining production is expected to have improved somewhat in July, after declining in June.
Production likely rose 1.3% y/y in July, following a contraction of 3.5% in June.

Brent crude oil is currently at $71.09/bbl; ($70.61/bbl*).
Gold is at $2518/oz ($2515/oz*).
SA CDS 192bps*, Brazil 156bps* and Turkey 276bps*.
Yields: US 10yr at 3.65%*, German bund at 2.11%*, SA 10-year generic at 10.30%*, SA’s R2030 at 8.97%*.

* Denotes yesterday’s close.

Key events and data:

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