Closing the loop 20 October 2021

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is stronger at R14.44/$ (R14.51/$*) today; it traded in a range of R14.40/$ to R14.57/$.
It is below its 50-day, 100-day and 200-day moving averages (R14.74/$, R14.52/$ and R14.56/$, respectively).
EM currencies were mixed today; the BRL (+0.7%), INR (+0.6%) and TRY (+0.6%) were amongst the biggest gainers; the PHP (-0.2%), CNY (-0.2%) and THB (-0.1%) were amongst the biggest losers.

UK health officials have called on the government to immediately implement its “Plan B” for further restrictions in England to avert a crisis in the NHS over the winter.
This comes on the back of an increase in case numbers, hospital pressures and high Covid-19 mortality rates.
Some of these restrictions include compulsory mask-wearing, vaccine passports and work-from-home orders.

Inflation data has been in the spotlight today.
UK CPI moderated to 3.1% y/y in September from 3.2% y/y in August.
The respite came as restaurant prices rose less than the previous year.
The moderation in CPI, however, is likely to be temporary.
Sharp price increases are expected in October again as the latest energy price hike takes effect.
Eurozone CPI increased to 3.4% y/y in September from 3.0% y/y in August.
Core inflation, however, remained unchanged at 1.9%y/y in September, albeit at its highest in over a decade.
The ECB is likely to maintain its view that rising inflation is transitory and may look through it.

Locally, the September CPI registered in line with expectations coming in at 5.0% y/y from 4.9% y/y in August.
On a m/m basis, CPI came in at 0.2% in September from an increase of 0.4% in August.
Core CPI was also higher at 3.2% y/y in September from 3.1% y/y in August.
Rental inflation measured in the Q3:21 survey reflected only a marginal further recovery.
We view the subdued core inflation and rental inflation as indications that demand-pull inflation remains tame.
This supports our view that the SARB can delay rate hikes till next year, notwithstanding caution about global price pressure from supply constraints.
We expect the SARB’s MPC to keep the repo rate unchanged at 3.5% at the November MPC meeting.
Several central banks have already begun hiking interest rates.

Brent crude oil is at $84.44/bbl; ($85.08/bbl*).
Gold price is at $1783/oz ($1769/oz*).
SA CDS is at 208bps (208bps), lower than Brazil 211bps (208bps*) and Turkey 447bps (447bps*).
Yields: US 10yr at 1.62% (1.63%*), German bund at -0.126% (-0.106%*) and SA 10-year generic at 9.74% (9.82%*), SA’s R186 is at 7.82% (7.92%*).
The JSE ALSI is down by 0.2% today (0%*).

* Denotes yesterday’s close.

Key events and data:

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