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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 down this morning, and up by 28.9% year-to-date.
  • The gold price is down this morning, and down by 3.3% year-to-date.
  • 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: 

  • 09h00: Turkey CPI, PPI (July)
  • 09h15: SA industry-wide PMI (July)
  • 10h00: Eurozone S&P Global services and composite PMI (July – final)
  • 10h30: UK S&P Global services and composite PMI (July – final)
  • 11h00: Eurozone PPI (June), retail sales (June)
  • 13h00: US MBA mortgage applications (29 July)
  • 15h45: S&P Global services and composite PMI (July – final)
  • 16h00: US durable goods, factory orders (June), ISM services (July)
  • 23h30: Brazil interest rate decision – 50 bps hike expected

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