In the loop 14 May 2025

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R18.32/$, after closing unchanged yesterday (R18.31/$*).
EM currencies were mixed yesterday; the BRL (+1.2%), PLN (+1.0%) and HUF (+1.0%) were the biggest gainers; the THB (-0.6%), PHP (-0.6%) and MYR (-0.5%) were the biggest losers.
Asian equity markets are mixed this morning; the Nikkei is down, while the Hang Seng and Shanghai Composite are up.

ECB Governing Council members Gabriel Makhlouf and Jose Luis Escriva yesterday advocated for the ECB to utilise a scenario analysis to navigate the current uncertainty in the economy.
Makhlouf presented three scenarios for how the trade war could potentially play out.
The first scenario envisages short-lived tariff threats, but with persistent uncertainty; this could prove deflationary.
The second scenario assumes that reciprocal tariffs become permanent, leading to retaliatory measures; this has a more negative impact on growth.
The third scenario sees the US agreeing on a trade deal with the region, but tension with the China remains; this could result in exports from China redirected to the Eurozone.
Escriva urged the bank not to rely on its baseline outlook in an environment of elevated uncertainty.
Escriva also noted that the ECB should be “agile in potentially changing the monetary policy response”.

ECB Governing Council member Francois Villeroy de Galhau commented that the central bank will likely lower its benchmark interest rate by the summer as trade tensions aren’t fuelling inflation in the region.
He noted that “the Trump administration’s protectionism will lead to a restarting of inflation in the US, but not in Europe”.
Villeroy added that this would allow for another interest rate reduction between now and summer.
Several ECB policymakers have urged caution citing potential inflationary concerns down the line.
The ECB’s next scheduled monetary policy meetings are 6 June and 24 July.

US President Trump yesterday renewed his attack on Fed Chair Jerome following the surprise moderation in inflation.
The president again called for the Fed to cut interest rates.
This comes just weeks after he was forced to soften his criticism of the Fed chair and his threats to dismiss Powell.
The Fed kept the Fed funds rate unchanged last week and warned of heightened uncertainty over the President’s economic agenda.

The US MBA mortgage applications for the week ending 9 May is scheduled for release today.
While mortgage rates haven’t come down significantly, lenders have reported an increase in demand for home purchase loans.
Lenders noted that applicants for loans do not seem to be overly concerned about economic conditions.

Brent crude oil is currently at $66.22/bbl; ($66.63/bbl*).
Gold is at $3224/oz ($3251/oz*).
SA CDS 211bps*, Brazil 162bps* and Turkey 309bps*.
Yields: US 10yr at 4.46%*, German bund at 2.68%*, SA 10-year generic at 10.55%*, SA’s R2035 at 10.51%*.

* Denotes yesterday’s close.

Key events and data:

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