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Closing the loop 21 January 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger, at R15.11/$ (R15.16/$*) today; it ranged between R15.10/$ and R15.27/$.
  • The currency is below its 50-day and 100-day moving averages (R15.75/$ and R15.30/$, respectively) and above its 200-day moving average (R14.81/$).
  • EM currencies were mixed today; the CLP (+0.4%), COP (+0.3%) and ZAR (+0.3%) were amongst the biggest gainers; the TRY (-0.7%), CZK (-0.4%) and CZK (-0.4%) were amongst the biggest losers.
  • UK retail sales for December fell by 0.9% y/y, well short of expectations for an increase, from a 4.3% y/y increase in November.
  • Sales were down by 3.7% m/m in December from a 1.0% m/m increase in November.
  • The plunge in sales comes as the spread of the Omicron variant kept shoppers at home.
  • Restrictions to control the spread of the virus have since been lifted which could support retail sales in January.
  • However, higher inflation, interest rates and taxes will likely keep consumers’ incomes strained in 2022.
  • Markets are keeping an eye out for the December consumer confidence data out of the Eurozone later today.
  • The focus will move to the Fed’s first FOMC meeting for 2022 next week.
  • The Fed is largely expected to signal a March lift-off in rates, with a 25 bps hike currently pencilled in.
  • A reduction in the balance sheet is expected soon after the rate increase.
  • There will be no inflation and growth forecast published at this meeting.
  • Markets will be watching Fed Chair Jerome Powell’s press conference for further clues.
  • Locally, we look to the SARB’s first MPC meeting for 2022 next week; the bank is expected to hike the repo rate by 25 bps to 4.0%.
  • The markets will be keeping an eye on changes to the SARB’s inflation and GDP forecasts.
  • The SARB’s leading indicator for November is also due out next week.
  • Stats SA also releases the December PPI print which is expected to have increased to 10.2% y/ from 9.6% y/y in November. 
  • The oil price is down by 0.9% today, and up by 12.7% in the year-to-date.
  • The gold price is down by 0.1% today, and up by 0.6% in the year-to-date.
  • Brent crude oil is at $87.66/bbl ($88.38/bbl*).
  • Gold price is at $1841/oz ($1842/oz*).
  • SA CDS is at 202bps (202bps*), Brazil 218bps (214bps*) and Turkey 522bps (524bps*).
  • Yields: US 10yr at 1.76% (1.80%*), German bund at -0.071% (-0.024%*) and SA 10-year generic at 9.65% (9.70%*), SA’s R186 is at 7.62% (7.67%*).
  • The JSE ALSI is down by 2.1% today (+0.1%*).

* Denotes yesterday’s close. 

Key events and data tomorrow:

  • On Monday: 02h30: Japan Jibun Bank manufacturing, services and composite PMI (January)
  • 11h00: Eurozone Markit manufacturing, services and composite PMI (January)
  • 11h30: UK Markit manufacturing, services and composite PMI (January)
  • 16h45: US Markit manufacturing, services and composite PMI (January)

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