In the loop 03 August 2022

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R16.71/$, after closing stronger yesterday (R16.70/$*).
EM currencies were mixed yesterday; the RUB (+3.1%), INR (+0.4%) and CNY (+0.2%) were the biggest gainers; the BRL (-1.8%), CLP (-1.7%) and MXN (-1.4%) were the biggest losers.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.

San Francisco Fed President Mary Daly commented yesterday that the Fed is likely to continue raising rates and is expected to keep them high for a while.
Daly noted that it is “terribly hard” on the economy for the Fed to increase rates and then lower them quickly.
She further added that the Fed’s work in terms of taming inflation is nowhere near done.
Daly also said that more people would be willing to drive further for new job opportunities should there be some gas price relief.
And, she does not see a labour market that is in recession.

Chicago Fed President Charles Evans commented yesterday that a 50 or 75 bps rate hike would be reasonable at the September FOMC meeting.
The central bank could then revert to 25 bps increments thereafter; Evans expects the Fed funds rate to reach 3.75% to 4% by the end of Q2:23.
He noted that if the bank does not see an improvement in inflation soon, the Fed may need to tighten policy more.
Evans also noted that the labour market should remain strong even if economic growth trends lower.
He expects the US unemployment rate to remain below 4% this year.
Cleveland Fed President Loretta Mester emphasized the need to lower prices.

China’s Caixin services PMI rose to a 15-month high, to 55.5 pts in July, from 54.5 pts in June.
The increase was driven by an improvement in new orders, mainly from domestic clients.
The composite PMI however slipped to 54.0 pts in July, from 55.3 pts in June.

G7 ministers yesterday reiterated their plan to cut their dependence on Russian oil.
This would include a complete ban on services that would allow Russian oil to be traded globally unless the price is below an agreed cap.
The aim is to prevent Russia profiting from rising energy prices; the revenue derived from energy sales is being used to fund its war against Ukraine.

Several countries’ services and composite PMI data releases are due out today.

Locally, the industry-wide PMI is due out today; the PMI is expected at 50.5 in July, from 52.5 in June.

Brent crude oil is currently at $100.23/bbl; ($100.54/bbl*).
Gold is at $1768/oz ($1776/oz*).
SA CDS 292bps*, Brazil 285bps* and Turkey 789bps*.
Yields: US 10yr at 2.74%*, German bund at 0.82%* and SA 10-year generic at 8.94%*, SA’s R186 at 8.94%*.

* Denotes yesterday’s close.

Key events and data:

Read PDF