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In the loop 19 September 2022

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R17.69/$, after closing weaker on Friday (R17.61/$*).
  • EM currencies were mixed on Friday; the HUF (+1.1%), KRW (+0.4%) and PLN (+0.2%) were the biggest gainers; the THB (-0.8%), TWD (-0.6%) and PHP (-0.4%) were the biggest losers.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.
  • The US FOMC meeting and policy decision will take the spotlight this week; the Fed is largely expected to hike rates by 75 bps on Wednesday.
  • More aggressive tightening, of 100 bps, however, cannot be ruled out following the higher-than-expected August CPI data.
  • The Fed is expected to signal restrictive rates until 2025
  • The Fed is expected to release new growth and inflation forecasts; the forecasts are likely to show inflation returning to the Fed’s 2% target only by 2025.
  • Small upward revisions for headline and core PCE for 2022 are expected, with larger upward revisions for 2023 and 2024 on the cards.
  • An upward revision in the longer-run unemployment, to above 4%, potentially as high as 4.5%, is expected.
  • Fed Chair Jerome Powell is expected to emphasize the committee’s determination to hold rates higher for longer. 
  • US housing starts and existing home sales data for August are due out this week.
  • The NAHB housing market index is due out today.
  • A rapid deterioration in affordability in recent months is likely to keep homebuilder sentiment and activity depressed.
  • Brazil may hold its key rate steady this week, officially ending its tightening cycle.   
  • The UK’s BOE meets this week and is expected to hike rates, by 50 bps.
  • UK markets and general government agencies are closed today for the funeral of Queen Elizabeth II.
  • Elsewhere in Europe, the Swiss National Bank and the Norges Bank are likely to raise policy rates by 50 bps this week.
  • The Riksbank may also tighten policy this week, by 75 bps.
  • Egypt’s central bank is largely expected to hike interest rates by 75 bps this week.
  • The BOJ may keep policy unchanged as it awaits stronger wage growth data.
  • Locally, the SARB is expected to hike the repo rate by 75 bps, to 6.25%, on Thursday.
  • The August CPI print is scheduled for release on Wednesday; CPI is expected at 7.6% y/y, from 7.8% y/y in July.
  • On a m/m basis, CPI is expected to have increased by 0.1% in August, after having increased by 1.5% in July.
  • The SARB’s leading indicator for July is due out tomorrow.
  • Eskom escalated loadshedding to Stage 6 as of yesterday.
  • This followed the tripping of a generation unit at both Kusile and Kriel power stations.
  • Eskom has appealed to the public to help conserve electricity.
  • Brent crude oil is up this morning, and up by 18.1% year-to-date.
  • The gold price is down this morning, and down by 8.8% year-to-date.
  • Brent crude oil is currently at $91.85/bbl; ($91.35/bbl*).
  • Gold is at $1668/oz ($1675/oz*).
  • SA CDS 278bps*, Brazil 248bps* and Turkey 749bps*.
  • Yields: US 10yr at 3.44%*, German bund at 1.77%* and SA 10-year generic at 10.75%*, SA’s R186 at 8.98%*.

* Denotes Friday’s close. 

 Key events and data: 

  • 16h00: US NAHB housing market index (September)

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