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Closing the loop 16 August 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is unchanged at R16.40/$ (R16.40/$*) today; it ranged between R16.39/$ and R16.51/$.
  • The currency is below its 50-day moving average (R16.45/$) and above its 100-day and 200-day moving averages (R15.94/$ and R15.70/$).
  • EM currencies are mixed today; the THB (+0.2%), RON (+0.1%) and BGN (+0.1%) are the biggest gainers; the HUF (-1.2%), COP (-1.1%) and BRL (-0.8%) are the biggest losers.
  • German ZEW survey expectations deteriorated further in August coming in at -55.3 from -53.8 in July.
  • Investor confidence weakened as the burden of higher energy prices started to filter through to companies and households.
  • The current conditions index also worsened in August.
  • The UK ILO unemployment rate remained steady at 3.8% in June; the economy added more jobs than expected in July and wage growth was stronger.
  • Today’s data keeps the possibility of a 50 bps hike in September on the cards.
  • The UK CPI print for July is in focus tomorrow; CPI is expected to have increased to 9.8% y/y in July after having increased to 9.4% y/y in June.
  • On a m/m basis, inflation is expected to have increased by 0.4% m/m following June’s 0.8% m/m increase.
  • Rising food and services prices are expected to account for the bulk of the rise in CPI; rising energy costs are also expected to have contributed.
  • The BOE is concerned that cost-pressures have become more broad-based; the bank expects a peak above 13% in October.
  • Eurozone GDP for Q2:22 is due out tomorrow and is expected at 0.7% q/q from 0.5% q/q in Q1:22.
  • US FOMC meeting minutes due out tomorrow will be watched for clues on the magnitude of rate hikes in the coming months.
  • The minutes are likely to highlight that the Fed still has a long way to go in its tightening cycle. 
  • It may help reset expectations around the path and magnitude of rate hikes following debate around whether another 75 bps may be in the pipeline.
  • Locally, retail sales for June are scheduled for release tomorrow and are expected to have fallen by 0.1% y/y following a 0.1% y/y gain in May.
  • Eskom has announced that it will implement Stage 2 loadshedding from 4pm until midnight.
  • The oil price is down by 0.1% today, and up by 22.1% in the year-to-date.   
  • The gold price is down by 0.3% today, and down by 2.9% in the year-to-date.
  • Brent crude oil is at $95.00/bbl ($95.10/bbl*).
  • Gold price is at $1776/oz ($1782/oz*). 
  • SA CDS is at 256bps (243bps*), Brazil 251bps (248bps*), Turkey 699bps (675bps*).
  • Yields: US 10yr at 2.82% (2.78%*), German bund at 0.96% (0.90%*) and SA 10-year generic at 10.52% (10.49%*), SA’s R186 is at 8.63% (8.60%*).
  • The JSE ALSI is up by 0.9% today (0.0%*).

* Denotes yesterday’s close. 

Key events and data:

  • 01h50: Japan trade balance (July), core machine orders (June)
  • 08h00: UK CPI, PPI, RPI (July)
  • 10h30: UK house price index (June)
  • 11h00: Eurozone employment (Q2:22), GDP (Q2:22)
  • 13h00: SA retail sales (June)
  • 13h00: US MBA mortgage applications (12 August)
  • 14h30: US retail sales (July)
  • 16h00: US business inventories (June)
  • 20h00: US FOMC meeting minutes (27 July) 

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