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Closing the loop 18 August 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is weaker at R16.77/$ (R16.66/$*) today; it ranged between R16.56/$ and R16.80/$.
  • The currency is above its 50-day, 100-day and 200-day moving averages (R16.50/$, R15.99/$ and R15.71/$).
  • EM currencies are mixed today; the RUB (+0.9%) and MXN (+0.1%) are the biggest gainers; the CLP (-2.2%), COP (-1.8%) and HUF (-1.0%) are the biggest losers.
  • Turkey’s central bank cut its key benchmark rate by 100 bps to 13% unexpectedly today.
  • The cut comes despite inflation having soared to 79.6% y/y in July.
  • The MPC noted the “updated level of the policy rate is adequate under the current outlook”.
  • Policymakers also noted that it is important for “financial conditions to remain supportive to preserve the growth momentum in industrial production”.
  • This remains important in periods of increasing uncertainties regarding global growth.
  • The TRY weakened by 0.8% on the day.
  • The Eurozone’s CPI for July (final estimate) came in at 8.9% y/y from 8.6% y/y in June.
  • On a m/m basis, CPI increased by 0.1% in July from an increase of 0.8% y/y in June.
  • Core CPI also increased in July to 4.0% y/y from 3.7% y/y in June.
  • The ECB is expected to hike rates further at its September MPC meeting.
  • San Francisco Fed President Mary Daly commented today that inflation is too high and favours a rate hike of 50-75 bps at its next FOMC meeting in September.
  • Daly noted that the Fed funds rate needs to increase above 3% by the end of the year to cool inflation.
  • US existing home sales fell by 5.9% m/m in July following a 5.5% m/m in June.
  • Sales fell for a sixth consecutive month to 4.81 million, the weakest since May 2020, from 5.11 million in June.
  • Sales were impacted by higher borrowing costs and waning demand.
  • Japan’s CPI for July is scheduled for release tomorrow and is expected to have increased to 2.6% y/y from 2.4% in June.
  • CPI excluding food is also expected to have ticked up in July to 2.4% y/y from 2.0% y/y in June.
  • Higher prices of food and energy prices are expected to be the main drivers of inflation in July.
  • Locally, it was a quiet day as far as data releases are concerned.
  • Eskom has implemented Stage 2 loadshedding from 4pm until midnight today.
  • The oil price is up by 2.2% today, and up by 23.0% in the year-to-date.   
  • The gold price is up by 0.1% today, and down by 3.6% in the year-to-date.
  • Brent crude oil is at $95.66/bbl ($93.65/bbl*).
  • Gold price is at $1763/oz ($1762/oz*). 
  • SA CDS is at 274bps (271bps*), Brazil 254bps (259bps*), Turkey 78bps (736bps*).
  • Yields: US 10yr at 2.84% (2.89%*), German bund at 1.08% (1.08%*) and SA 10-year generic at 10.63% (10.63%*), SA’s R186 is at 8.73% (8.73%*).
  • The JSE ALSI is up by 0.1% today (-0.8%*).

* Denotes yesterday’s close. 

Key events and data:

  • 01h01: UK GfK consumer confidence (August)
  • 01h30: Japan CPI (August)
  • 08h00: UK retail sales (July)
  • 10h00: Eurozone current account (June)

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