In the loop

What you should know this morning:

• The rand is weaker this morning, at R16.51/$, after closing stronger yesterday (R16.48/$*).
• EM currencies were mixed yesterday; the HUF (+0.6%), MYR (+0.4%) and ZAR (+0.4%) were the biggest gainers; the RUB (-0.9%), TWD (-0.2%) and CLP (-0.2%) were the biggest losers.
• Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.

• Iran war: negotiations yesterday focussed on contentious issues, including Iran's nuclear programme, sanctions relief, the release of frozen assets, and the governance of the Strait of Hormuz, which remains the central bargaining tool given its role in global oil flows.
• Iran signalled that it would only allow shipping through Hormuz on routes it authorises.
• The US rejected any attempt to impose tolls or restrictions, underscoring a fundamental disagreement over maritime control.
• Preparations are underway for further rounds of talks (including planned technical discussions in Switzerland next week).
• Both the US and Iran have continued to issue warnings that failure to reach agreement could lead to renewed military action.

• ECB Governing Council member Emmanuel Moulin noted yesterday that the ECB's recent interest rate increases clearly signals the central bank's determination to tackle inflation and safeguard price stability.
• He underscored that elevated inflation, driven in part by higher energy costs and their spillover into broader prices, requires a decisive policy response.
• He added that rate hikes form a central tool to prevent inflation from becoming entrenched.
• Moulin framed the tightening cycle as a necessary and credible response to inflation pressures, reinforcing the ECB's commitment to bringing inflation back to its 2% target and maintaining confidence in its policy framework.

• The ECB's 1-year inflation expectations, due out today, are likely to have moderated to 3.9% in May, from 4.0% in April.
• The 3-year inflation expectations are also expected to have moderated in May, to 2.8%, from 2.9% in April.

• Chicago Fed President Austan Goolsbee yesterday said that the latest inflation report offered some encouraging signs but cautioned that overall price pressures remain too elevated. 
• He noted that core inflation is “still well too high and trending in the wrong direction”. Goolsbee added that a renewed pickup in inflation this year represents the Fed's biggest challenge. 
• While financial markets expect the Fed to raise interest rates in September, Goolsbee declined to indicate how he would vote. 
• He also praised Fed Chair Kevin Warsh's efforts to move away from providing forward guidance. 
• Goolsbee remarked that he supported the decision to discourage that approach in the Fed's communications.

• New York Fed President John Williams commented that interest rates are appropriately set to guide inflation back towards the Federal Reserve's target over time. 
• He described inflation as remaining “unquestionably elevated,” citing the combined effects of tariffs, the energy shock caused by the Iran war, and strong investment linked to artificial intelligence. 
• He noted that the surge in AI-related investment could place greater upward pressure on prices than currently anticipated.
• Ongoing supply chain disruptions stemming from the Middle East conflict continue to pose risks to both economic growth and the inflation outlook. 
• Williams expects inflation to slow to around 3.5% by the end of the year, then gradually declining towards the Fed's 2% target, which he believes will be achieved by 2028.

• The US University of Michigan consumer index for June (final estimate) is expected to have increased to 50.0, from 44.8 in May.
• Sentiment is likely to have been boosted by the peace deal between the US and Iran signed last week.
• The boost, however, is likely to be limited if consumers remain focused on domestic concerns, including inflation and interest rates.
• US advance goods trade balance for May is also on the cards today; the deficit is likely to have widened to $85.0bn in May, from a deficit of $83.0bn in April.

• Locally, it's a quiet day as far as data releases are concerned.

• Brent crude is down this morning, and up by 21.1% year-to-date.
• The gold price is down this morning, and down by 7.1% year-to-date.

• Brent crude oil is currently at $73.70/bbl; ($75.26/bbl*).
• Gold is at $4012/oz ($4026/oz*).
• SA CDS 125bps*, Brazil 127bps* and Turkey 219bps*.
• Yields: US 10yr at 4.37%*, German bund at 2.85%*, SA 10-year generic at 8.37%*, SA's R2035 at 8.18%*.

* Denotes yesterday's close. 

Key events and data:

• 10h00: Eurozone ECB 1 yr and 3 yr inflation expectations (May)
• 14h30: US advance goods trade balance (May)
• 16h00: US University of Michigan sentiment, 1 yr and 5-10 yr inflation expectations (June – final)

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