Closing the loop

Market highlights:

• The rand is weaker at R15.97/$ (R15.95/$*) today; it ranged between R15.85/$ and R16.05/$.
• The currency is above its 50-day, 100-day and 200-day moving averages (R15.63/$, R15.33/$ and R15.35/$).
• EM currencies are largely down today; the BRL (-1.7%), HUF (-1.2%) and CLP (-1.0%) are the biggest losers; the RUB gained 2.2% today.

• Eurozone inflation for May (final estimate) registered in line with expectations coming in at 8.1% y/y from 7.4% y/y in April.
• On a m/m basis, CPI increased to 0.8% in May from 0.6% in April.
• Core CPI was also up in May to 3.8% y/y from 3.5% y/y in April.
• The Russia-Ukraine war and global supply chain disruptions have pushed up food prices and household energy bills.
• Services inflation also continued to climb in May.
• The increase in underlying inflation adds to the ECB’s case for a more aggressive rate hiking cycle.

• ECB Governing Council member Klaas Knot noted that a few 50 bps increases in rates could be needed if inflation worsens in the coming months.
• Knot supports a 50 bps increase in rates at the September MPC meeting; still, he does not expect rates to reach 2% before early 2023.
• The ECB has previously outlined a “sustained” cycle of rate increases in the months ahead but has not specified the magnitude of the increases.

• Following this week’s 25 bps increase in rates, the BOE looks set to hike by 50 bps at its next meeting as it steps up its inflation-fighting measures.
• Policymakers noted yesterday that the bank would have to move “forcefully” in the future if needed.

• US Fed Chair Jerome Powell commented today that the Fed’s commitment to price stability contributes to widespread confidence in the dollar.
• Powell however noted that rapid changes in the global monetary system may affect the future international role of the USD.
• The dollar extended its gains today.

• Locally, we look to the SARB’s leading indicator for April next week; the index increased to 128 pts in March from 127.2 pts in February.
• The May CPI is also on the cards next week; CPI is expected to have breached the upper limit of the target band rising to 6.2% y/y from April’s increase of 5.9% y/y.
• On a m/m basis, CPI is expected to have increased by 0.3% in May from an increase of 0.6% in April.

• The oil price is down by 3.2% today, and up by 49.1% in the year-to-date.
• The gold price is down by 0.5% today, and up by 0.6% in the year-to-date.

• Brent crude oil is at $115.92/bbl ($119.81/bbl*).
• Gold price is at $1840/oz ($1850/oz*). 
• SA CDS is at 286bps (290bps*), Brazil 280bps (279bps*), Turkey 827bps (832bps*).
• Yields: US 10yr at 3.25% (3.19%*), German bund at 1.70% (1.71%*) and SA 10-year generic at 10.70% (10.70%**), SA’s R186 is at 8.66% (8.87%**).
• The JSE ALSI is down by 2.8% today (+2.8%**).

* Denotes yesterday’s close.

** Denotes Wednesday’s close.

Key events and data:

• On Monday: no data releases

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