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In the loop 22 September 2022

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R17.74/$, after closing stronger yesterday (R17.69/$*).
  • EM currencies were mixed yesterday; the COP (+0.5%), MYR (+0.1%) and ZAR (+0.1%) were the biggest gainers; the HUF (-2.7%), PLN (-2.1%) and CZK (-1.2%) were the biggest losers.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.
  • The Fed raised its benchmark rate by 75 bps yesterday, as expected, as it continues its fight to tame inflation; the decision was unanimous
  • The increase lifts the Fed funds rate to a range of 3% to 3.25%.
  • Fed Chair Jerome Powell reiterated that the policymakers are “highly attentive to inflation risks.” 
  • The bank noted that it “anticipates that ongoing increases in the target range will be appropriate”.
  • The Fed’s dot plot, which signals the bank’s outlook for the path of interest rates, sees rates rising to 4.4% year end and to 4.6% in 2023.  
  • Rates are then seen coming down to 3.9% in 2024 and 2.9% in 2025.
  • The Bank of Japan kept policy unchanged, as expected.
  • The bank held steady despite expecting faster inflation for the current fiscal year.
  • Governor Haruhiko Kuroda signalled “still a long way to go” before policy can be normalised.
  • Investors are now focusing on the BOE’s policy decision later today; the central bank is largely expected to hike rate by 50 bps, to 2.25%.
  • There is a possibility that the bank could consider hiking more aggressively.
  • The recently announced emergency energy support package, however, reduces the need to increase the pace of tightening.
  • Inflation could peak at a lower level and could decline faster next year with the help of the support package. 
  • The Norges Bank and the Swiss National Bank are both expected to hike rates later today.
  • The Turkish central bank also meets today and will likely hold rates unchanged at 13%.
  • The bank noted the August interest rate cut was “adequate under the current outlook”.
  • The bank is expected to cut rates again in Q4:22 if the recent slowdown in leading indicators continues.
  • Locally, the spotlight is on the SARB’s MPC decision later today; the bank is largely expected to hike the repo rate by 75 bps, to 6.25%. 
  • Investors will likely keep a close eye on changes to the bank’s inflation and growth forecasts. 
  • Eskom continues with Stage 5 loadshedding today.
  • Brent crude oil is up this morning, and up by 15.9% year-to-date.
  • The gold price is down this morning, and down by 9.1% year-to-date.
  • Brent crude oil is currently at $90.17/bbl; ($89.83/bbl*).
  • Gold is at $1662/oz ($1665/oz*).
  • SA CDS 289bps*, Brazil 261bps* and Turkey 739bps*.
  • Yields: US 10yr at 3.52%*, German bund at 1.89%* and SA 10-year generic at 10.97%*, SA’s R186 at 9.08%*.

* Denotes yesterday’s close.

 Key events and data: 

  • 10h00: Eurozone ECB publishes economic bulletin
  • 13h00: UK BOE MPC interest rate decision – 50 bps hike expected
  • 14h30: US current account balance (Q2:22), initial jobless claims (17 September)
  • 15h00: SA SARB MPC interest rate decision – 75 bps hike expected
  • 16h00: Eurozone consumer confidence (September)
  • 16h00: US leading index (August)

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