In the loop 10 April 2025

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is stronger this morning, at R19.30/$, after closing weaker yesterday (R19.76/$*).
EM currencies were mixed yesterday; the BRL (+3.2%), COP (+2.5%) and CLP (+2.0%) were the biggest gainers; the MXN (-0.7%), ZAR (-0.6%) and INR (-0.5%) were the biggest losers.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.

Central bank watch: the Central Bank of the Philippines is expected to cut its key interest rate by 25 bps, to 5.5%.
The cut is expected as the central bank shifts to support growth now that inflation is under control.

China’s CPI came in lower than expected in March, declining by 0.1% y/y, from a 0.7% y/y decrease in February.
PPI was also down more than expected in March, by 2.5% y/y, from a 2.2% y/y decline in February.

President Trump yesterday announced a 90-day pause on reciprocal tariffs on a wide range of countries that were willing to negotiate with the US.
Trump, however, increased tariffs on Chinese imports to 125%, escalating his trade war.

The meeting minutes of the Fed’s March FOMC meeting indicated that Fed policymakers are concerned about the risk of stagflation on the back of US tariffs.
Policymakers noted “risks to inflation as tilted to the upside and risks to employment as tilted to the downside”.
The minutes reflected that the Fed had to grapple with the risks that trade policies pose to the Fed’s goals of stable prices and maximum employment.
The committee upwardly revised their inflation forecasts for 2025 and downgraded their growth forecasts at the March gathering.
Those projections, however, will be seen as already outdated.
The March FOMC meeting was held before the announcement of the sweeping tariffs at the beginning of April, of which a universal 10% remains in force.

Richmond Fed President Tom Barkin yesterday commented that he is watching consumer dynamics closely amid the changes in US trade policies.
Minneapolis Fed President Neel Kashkari commented yesterday that he is less likely to lower interest rates in the face of tariffs given their inflationary impact.
Kashkari expects the tariffs to lower investment and economic growth as well as push up inflation in the short term.
He noted measures of short-term inflation expectations that have already begun to increase as well as the US’s experience with elevated inflation as reasons the Fed may not be able to “look through” any tariff-driven price shocks.

The US March CPI will be in focus today and is likely to come in at 2.6% y/y, from 2.8% y/y in February.
On a m/m basis, headline CPI is likely to have increased by 0.1% in March, after having increased by 0.2% in February.
Core CPI is expected to come in at 3.0% y/y in March, from 3.1% y/y in February.

Locally, manufacturing production for February is due out today; production is expected to have declined by 3.1% y/y in February, after having fallen by 3.3% y/y in January.
On a m/m basis, manufacturing production is likely to have decreased by 0.2% in February, following a 0.2% increase in January.

Brent crude oil is currently at $64.78/bbl; ($65.48/bbl*).
Gold is at $3125/oz ($3092/oz*).
SA CDS 285bps*, Brazil 220bps* and Turkey 375bps*.
Yields: US 10yr at 4.33%*, German bund at 2.59%*, SA 10-year generic at 11.08%*, SA’s R2035 at 11.06%*.

* Denotes yesterday’s close.

Key events and data:

13h00: SA manufacturing production (February)
14h30: US CPI (March), real average hourly earnings (March), initial jobless claims (5 April)
20h00: US Federal budget balance (March)

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