In the loop 07 May 2024

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R18.51/$, after closing stronger yesterday (R18.45/$*).
EM currencies were mixed yesterday; the CLP (+0.9%), MXN (+0.5%) and PLN (+0.5%) were the biggest gainers; the ARS (-0.2%), BGN (-0.1%) and INR (-0.1%) were the biggest losers.
Asian equity markets are mixed this morning; the Nikkei is up, while the Hang Seng and Shanghai Composite are down.

Richmond Fed President Thomas Barkin commented yesterday that currently high interest rates will likely slow the economy further and cool inflation towards the central bank’s 2% target.
He added that the “strength of the labour market offers the Fed time to gain confidence that inflation is moving sustainably lower before lowering borrowing costs”.
Barkin highlighted the risk of housing and services inflation that will likely keep price gains elevated.
He said that, after the recent spate of disappointing inflation data, following earlier signs of improvement in late 2023, the Fed would need to be cautious in deciding when to cut interest rates.

New York Fed President John Williams noted yesterday that the Fed would base the decision on when to lower borrowing costs on the totality of data.
He noted that it is particularly worrisome that monthly inflation prints have been overshooting expectations.
He noted that, while the US economy is healthy, it is growing at a slower pace; Williams sees US GDP in a 2.0-2.5% range in 2024.
He added that, eventually, the FOMC will start cutting interest rates; Williams did not give guidance on when the first interest rate cut may be.

The Japanese Jibun Bank services PMI increased to 54.3 in April (final estimate), the highest level since August 2023, and up from 54.1 in March.
Prices charged by firms increased sharply in April, with inflation the highest since April 2014 when the nation raised sales tax.
Firms noted expenses from higher wages as the main reason for passing on costs to customers.
The composite PMI increased to 52.3 in April (the highest since August 2023), from 51.7 in March.

The Reserve Bank of Australia (RBA) has kept its benchmark interest rate unchanged, at a 12-year high of 4.35%, as expected.
The central bank noted that it would be some time before inflation could be sustainably in the target range.
The committee “remains vigilant” to upside risks to inflation.

Eurozone retail sales are scheduled for release today and are expected to have increased by 0.7% m/m in March, after having declined by 0.5% m/m in February.
On a y/y basis, sales are likely to be down by 0.2% in March, following a 0.7% decline in February.

Brent crude oil is currently at $83.48/bbl; ($83.33/bbl*).
Gold is at $2321/oz ($2325/oz*).
SA CDS 230bps*, Brazil 134bps* and Turkey 293bps*.
Yields: US 10yr at 4.48%*, German bund at 2.46%*, SA 10-year generic at 11.90%*, SA’s R2030 at 10.56%*.

* Denotes yesterday’s close.

Key events and data:

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