In the loop 21 November 2023

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is stronger this morning, at R18.27/$, after closing weaker yesterday (R18.38/$*).
EM currencies were mixed yesterday; the COP (+1.4%), BRL (+1.1%) and RUB (+1.1%) were the biggest gainers, the TRY (-0.2%), ZAR (-0.1%) and INR (-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.

ECB Governing Council member Pablo Hernandez de Cos noted that it would be premature for the bank to start discussions about lowering interest rates.
He noted that “the current level of interest rates maintained long enough should be sufficient to achieve our inflation target of 2% in the medium term”.
ECB President Christine Lagarde is due to speak on the economy and monetary policy later today.

BOE Governor Andrew Bailey commented yesterday that the central bank might have to raise interest rates again.
He warned that food and energy costs remain an upside risk to the inflation outlook.
Bailey noted that policymakers are keeping an eye out for “further signs of inflation persistence that may require interest rates to rise again”.
He reiterated that it would be too soon to be considering interest rate cuts.

Richmond Fed President Thomas Barkin commented yesterday that US economic data points to an economy that’s expanding while CPI is moderating.
The progress on CPI, however, isn’t sufficient for the Fed to declare victory on inflation.
The focus of the Fed, therefore, remains on getting inflation back to the bank’s 2% inflation target.
The US FOMC minutes of the 31 October to 1 November meeting are scheduled for release today.
The minutes will likely shed light on why the policy statement and Fed Chair Jerome Powell’s comments were relatively dovish despite strong economic data.
Powell suggested that the previous dot plot from the September FOMC meeting was growing stale, suggesting that policymakers do not see an additional rate hike this year.
Investors have been increasingly convinced that the Fed is finished with its hiking cycle, with many seeing a cutting cycle on the cards.

US existing home sales for October, due out today, likely declined in October after pending home sales, which leads existing sales by a month or two, declined by an average of 3% from August to September.
Existing home sales are likely to have declined by 1.5% m/m in October, after having fallen by 2.0% m/m in September.
High mortgage rates have also worsened affordability for homes.
The prospect of rate cuts in 2024 may keep prospective buyers on hold for now.

Locally, the SARB’s leading indicator for September is scheduled for release today; the index increased to 110.9 in August.
The BER’s business confidence index for Q4:23 is also on the cards today; the index is likely to have increased to 38, from 33 in Q3:23.
Eskom: Stage 1 loadshedding is currently in place until 4pm; Stage 3 will be implemented then until 5am tomorrow.

Brent crude oil is currently at $82.03/bbl; ($82.32/bbl*).
Gold is at $1992/oz ($1973/oz*).
SA CDS 238bps*, Brazil 150bps* and Turkey 341bps*.
Yields: US 10yr at 4.39%*, German bund at 2.61%* and SA 10-year generic at 11.29%*, SA’s R2030 at 10.03%*.

* Denotes yesterday’s close.

Key events and data:

Read PDF