In the loop 21 June 2022

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is marginally stronger this morning, at R16.03/$, after closing weaker yesterday (R16.04/$*).
EM currencies were mixed yesterday; the RUB (+3.9%), PLN (+0.8%) and the HUF (+0.8%) were the biggest gainers; the CLP (-0.8%), BRL (-0.7%) and PHP (-0.6%) were the biggest losers.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.

With talks of a US recession gathering pace, US President Joe Biden however commented yesterday that “a US recession isn’t inevitable”.
President Biden and congressional Democrats are in talks about legislation, aiming to fight inflation and revive parts of Biden’s agenda.
Biden has indicated a medical care package as in the pipeline, with a reduction in the cost of insulin as a key feature.
Investments in both clean energy and fossil fuels are also being discussed.
The economic plan will aim to reduce the US budget deficit; there’s also likely to be increased taxes on the wealthy, corporations, or both.

St. Louis Fed President James Bullard commented that inflation expectations could become “unmoored without credible Fed action”.
This could then lead to a “new regime of high inflation and volatile real economic performance”.
Bullard further noted that the current economic situation is adding strain to the Fed’s inflation-fighting credibility.
Indeed, Cleveland Fed President Loretta Mester noted that the risk of a US recession is increasing.
And, it could take several years for inflation to return to the central bank’s 2% target.

ECB President Christine Lagarde aims to hike rates next month, and again in September.
However, she noted that the risks to financial stability have increased since January.
The ECB’s Philip Lane noted that the magnitude of the September hike is currently undecided.

The RBA MPC meeting minutes have flagged further rate hikes.
Governor Philip Lowe noted that rates are likely to go up by 25-50 bps in August, the same as in June.
The bank will have data on Q2:22 inflation as well as quarterly economic forecasts ahead of that meeting.

SA has the 30th highest Covid caseload, at 3.986 million; 291 new cases were reported yesterday.
18.281 million people, or 45.94% of the SA adult population, have been fully vaccinated.

The SARB leading indicator for April is due out this morning; the index increased to 128 pts in March, from 127.2 pts in February.
Eskom will continue Stage 2 loadshedding from 17h00 to 22h00 today.

Brent crude oil is currently at $115.38/bbl; ($113.12/bbl*).
Gold is at $1836/oz ($1835/oz*).
SA CDS 285bps*, Brazil 284bps* and Turkey 821bps*.
Yields: US 10yr at 3.22%*, German bund at 1.74%* and SA 10-year generic at 10.69%*, SA’s R186 at 8.66%*.

* Denotes yesterday’s close.

Key events and data:

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