In the loop 20 September 2023

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R18.93/$, after closing stronger yesterday (R18.92/$*).
EM currencies were mixed yesterday: the ZAR (+0.5%), COP (+0.4%) and MXN (+0.3%) were the biggest gainers; the RUB (-0.8%), THB (-0.6%) and PLN (-0.4%) were the biggest losers.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.

The People’s Bank of China (PBOC) commented that it has sufficient policy space to support the economy’s recovery.
This adds to expectations of more easing to come, including interest rate cuts, after this month’s pause.
Chinese banks kept their loan prime rates (LPR) unchanged today.
The 1 yr LPR was held at 3.45% and the 5 yr rate was maintained at 4.2%.

The UK CPI and PPI for August are on the cards today; the headline CPI likely climbed, while the core measure is expected to have moderated.
CPI is expected to come in at 7.0% y/y in August, from 6.8% y/y in July.
Core CPI is likely to have moderated to 6.8% y/y in August, from 6.9% y/y in July.
The BOE will keep a close eye on the core CPI measure ahead of its policy meeting on Thursday.
The BOE is largely expected to hike its benchmark policy rate by 25 bps, to 5.5%.

The Fed’s FOMC interest rate decision is in the spotlight today.
The Fed is largely expected to pause its rate hiking cycle.
Recent data outcomes have exhibited mixed signals for the US economy.
The Fed’s updated dot plot will be released this week and is expected to indicate that policymakers foresee one more rate hike in 2023, but it will likely be a close call.
Comments by Fed Chair Jerome Powell will also be closely watched for future policy guidance.

Locally, the August CPI is due out today; we expect CPI to come in at 5.0% y/y, from 4.7% y/y in July.
Food inflation remains a risk to the inflation data for August, while there is also some risk from municipal tariff increases (due in July) that will only be incorporated in the August inflation data.
Retail sales for July are likely to have declined by 1.0% y/y, after having declined 0.9% y/y in June.
Eskom: there is currently no loadshedding until 4pm; Stage 3 will be implemented then until 5am tomorrow.

Brent crude oil is currently at $93.52/bbl; ($94.34/bbl*).
Gold is at $1929/oz ($1930/oz*).
SA CDS 245bps*, Brazil 163bps* and Turkey 383bps*.
Yields: US 10yr at 4.35%*, German bund at 2.73%* and SA 10-year generic at 11.73%*, SA’s R2030 at 10.47%*.

* Denotes yesterday’s close.

Key events and data:

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