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Closing the loop 08 August 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger at R16.58/$ (R16.77/$*) today; it ranged between R16.57/$ and R16.80/$.
  • The currency is above its 50-day, 100-day and 200-day moving averages (R16.35/$, R15.84/$ and R15.66/$).
  • EM currencies are mixed today; the ZAR (+1.2%), COP (+1.0%) and CLP (+0.8%) are the biggest gainers; the KRW (-0.6%), PHP (-0.6%) and THB (-0.6%) are the biggest losers.
  • The Eurozone Sentix investor confidence index came in at -25.2 in August from -26.4 in July.
  • The sentiment index has been in negative territory for six consecutive months.
  • It’s a relatively quiet day tomorrow as far as marketing-moving international data releases are concerned. 
  • Investors are, however, eagerly awaiting the US July CPI data which is scheduled for release on Wednesday.
  • CPI is expected to have moderated to 8.7% y/y in July from 9.1% y/y in June.
  • Underlying price pressures, however, are continuing to build.
  • Prices of core items are expected to have risen in July and will likely have pushed annual core CPI to 6.1% y/y in July from 5.9% y/y in June.
  • Last week, non-farm payrolls increased by 528,000 in July, more than twice the 250,000 gain expected.
  • The probability that the Fed hikes the Fed funds rate by 75 bps at its September FOMC meeting has increased.
  • The Brazilian Central Bank (BCB) releases the minutes of its August MPC meeting tomorrow. 
  • Recall, the BCB hiked the Selic rate by 50 bps to 13.75% last week and hinted at another 25 bps hike at its September meeting.
  • Policymakers noted that the bank is now focused on inflation six quarters ahead rather than calendar-year targets. 
  • It was noted that focusing on Q1:24 would give the bank an opportunity to look past the effects of the recent temporary tax cuts on headline inflation. 
  • Still, the committee expects inflation to remain above the bank’s target. 
  • This change in the view has raised a number of questions, which the BCB may address in tomorrow’s minutes. 
  • Locally, it was a quiet day as far a data releases were concerned.
  • The oil price is up by 0.3% today, and up by 22.2% in the year-to-date.   
  • The gold price is up by 0.6% today, and down by 2.4% in the year-to-date.
  • Brent crude oil is at $95.07/bbl ($94.92/bbl*).
  • Gold price is at $1785/oz ($1775/oz*). 
  • SA CDS is at 261bps (275bps*), Brazil 267bps (275bps*), Turkey 720bps (735bps*).
  • Yields: US 10yr at 2.78% (2.82%*), German bund at 0.89% (0.96%*) and SA 10-year generic at 10.71% (10.73%*), SA’s R186 is at 8.85% (8.89%*).
  • The JSE ALSI is up by 1.2% today (+1.2%*).

* Denotes Friday’s close. 

Key events and data:

  • 08h00: Japan machine tool orders (July)
  • 13h00: Brazil BCB MPC meeting minutes (August meeting)
  • 14h30: US non-farm productivity (Q2:22)
  • SA public holiday – Women’s Day

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