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In the loop 27 January 2023

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R17.23/$, after closing weaker yesterday (R17.21/$*).
  • EM currencies were mixed yesterday; the PEN (+1.4%), PHP (+0.4%) and COP (+0.4%) were the biggest gainers; the HUF (-0.5%), CZK (-0.5%) and RUB (-0.4%) were the biggest losers.
  • While better than expected, yesterday’s Q4:22 GDP data out of the US reflected a slowdown in growth.
  • The GDP data is another sign that the US economy has thus far been able to withstand higher interest rates. 
  • The data is unlikely to sway the Fed’s decision when it meets on 1 February.
  • The Fed is largely expected to hike the Fed funds rate by 25 bps to control inflation.
  • The seven consecutive interest rate increases have already had the desired effect of steering prices lower, but it may be many more months before inflation returns to a normal level.
  • The US personal income and spending data releases for December are due out today.
  • The BOE and ECB are due to meet early in February to decide on monetary policy.
  • It’s likely that both central banks will deliver a further 50 bps rate hike.
  • Thereafter, the BOE will likely start to slow the pace of rate hikes.
  • UK inflation has passed its peak and economic data continues to point to both sluggish growth and easing price pressures.
  • This could prompt the BOE MPC to start slowing the pace of rate hikes sooner rather than later.
  • The ECB is also expected to hike by 50 bps in February.
  • Several policymakers have expressed their support for at least two more 50 bps rate hikes; some favour rate hikes into Q2:23.
  • Locally, it’s a quiet day as far as data releases are concerned. 
  • Eskom: Stage 4 loadshedding continues until further notice.
  • Brent crude oil is up this morning, and up by 2.2% year-to-date.
  • The gold price is down this morning, and up by 5.6% year-to-date.
  • Brent crude oil is currently at $87.86/bbl; ($87.47/bbl*).
  • Gold is at $1925/oz ($1926/oz*).
  • SA CDS 254bps*, Brazil 240bps* and Turkey 553bps*.
  • Yields: US 10yr at 3.49%*, German bund at 2.21%* and SA 10-year generic at 10.35%*, SA’s R186 at 8.10%*.

* Denotes yesterday’s close. 

 Key events and data: 

  • 11h00: Eurozone M3 money supply (December)
  • 15h30: US personal income and spending (December)
  • 17h00: US University of Michigan sentiment, 1 yr and 5-10 yr inflation expectations (January - final)

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