In the loop

What you should know this morning:

• The rand is stronger this morning, at R16.49/$, after closing stronger yesterday (R16.50/$*).
• EM currencies were mixed yesterday; the COP (+2.7%), PLN (+1.7%) and ZAR (+1.6%) were the biggest gainers; the PHP (-0.3%), TWD (-0.3%) and IDR (-0.2%) were the biggest losers.
• Asian equity markets are mixed this morning; the Nikkei and Shanghai Composite are up, while the Hang Seng is down.

• Iran war: the US launched what it described as a "heavy wave" of strikes against Iranian military targets in southern Iran after attacks on US forces and regional partners.
• Iran and its allies responded with missile attacks across the region.
• Prospects for a near-term settlement remained limited.

• Central bank watch: the BOJ kept its benchmark interest rate unchanged today, as expected.
• The BOJ signalled that underlying inflationary pressures remain firm and warned that core inflation could rise to a level above its 2% target later in the fiscal year 2026.
• Policymakers acknowledged upside risks to inflation, including demand-driven price pressures associated with the Middle East conflict and the weaker yen.
• The decision came amid heightened scrutiny of Japan's currency markets, following reported official intervention to support the yen after it weakened to multi-decade lows against the dollar.

• China's factory activity unexpectedly returned to contraction in July, while weaker services activity pointed to slowing economic momentum as soft domestic demand outweighed resilient exports.
• The official manufacturing PMI fell to 49.2 in July, from 50.3 in June, marking the first contraction since February 2026.
• The non-manufacturing PMI slipped to 49.0 in July, from 50.2 in June.
• The composite PMI declined to 49.3 in July, from 50.6 in June.

• UK Governor Andrew Bailey yesterday commented that the decision to keep interest rates unchanged at 3.75% reflected the need to balance encouraging progress on inflation with rising risks from higher energy prices.
• He noted that UK inflation has fallen faster than expected but warned that renewed conflict in the Middle East has led to elevated and volatile energy prices, which are likely to push inflation higher again later this year.
• Bailey emphasised that, while the underlying disinflation trend that was evident before the conflict remains intact, uncertainty around the energy outlook has increased significantly.
• Bailey stressed that the Bank stands ready to adjust policy if necessary; he believes that current interest rates are appropriate for now.

• The UK Nationwide house price index is expected to have increased by 1.9% y/y in July, down from 2.2% y/y in June.
• It is expected to have increased by 0.1% m/m in July, after having flatlined in June.

• The Eurozone CPI report for July will be released today; headline CPI is expected to have increased to 2.9% y/y in July, from 2.8% y/y in June.
• On a m/m basis, CPI is expected to have increased by 0.1% in July, following a 0.1% decline in June.
• Core CPI is expected to come in at 2.4% y/ in July, matching June's increase.
• The expected acceleration, and with inflation above the target for 5 consecutive months, is likely to bolster the case for an interest rate increase by the ECB at the September policy meeting,

• The US University of Michigan consumer index for July (final estimate), due for release today, is expected to have moderated to 54.0, from 54.4 (previous estimate).
• Consumers remain concerned about the inflation outlook and borrowing costs.

• Locally, the June trade balance is due for release today; the trade deficit is expected to have widened to R3.0bn in June, from a deficit of R1.8bn in May.
• Earlier this month, National Treasury withheld R13.5bn in local government equitable share transfers from 69 municipalities following a comprehensive assessment of their financial management and compliance.
• After actively monitoring the affected municipalities and reviewing their progress, Treasury approved the release of R7.1bn of the previously withheld funds.
• Treasury reiterated yesterday that it would not hesitate to withhold transfers again from municipalities that fail to improve their financial management and governance practices.

• Brent crude is down this morning, and up by 43.8% year-to-date.
• The gold price is down this morning, and down by 5.5% year-to-date.

• Brent crude oil is currently at $87.49/bbl; ($89.03/bbl*).
• Gold is at $4080/oz ($4103/oz*).
• SA CDS 130bps*, Brazil 125bps* and Turkey 239bps*.
• Yields: US 10yr at 4.64%*, German bund at 3.15%*, SA 10-year generic at 8.7%7*, SA's R2035 at 8.59%*.

* Denotes yesterday's close. 

Key events and data:

• 08h00: UK Nationwide house price index (July)
• 11h00: Eurozone CPI (July)
• 14h00: SA trade balance (June)
• 16h00: US University of Michigan sentiment, 1 yr and 5-10 yr inflation expectations (July – final)

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