Closing the loop 20 January 2022

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is stronger, at R15.13/$ (R15.31/$*) today; it ranged between R15.11/$ and R15.34/$.
The currency is below its 50-day and 100-day moving averages (R15.76/$ and R15.29/$, respectively) and above its 200-day moving average (R14.80/$).
EM currencies were mixed today; the ZAR (+1.2%), BRL (+0.7%) and CLP (+0.6%) were amongst the biggest gainers; the RUB (-0.5%), INR (-0.1%) and ARS (-0.1%) were amongst the biggest losers.

The December Eurozone CPI came in at 5.0% y/y from 4.9% y/y in November.
The record high print was driven by a surge in energy prices and the cost of food and goods.
Energy prices contributed the most to the headline number.
Goods inflation accelerated in December amid global supply chain bottlenecks.
Services inflation, however, slowed in December, albeit on the back of the statistical impact linked to weight changes used for travel services.

ECB President Christine Lagarde noted that the central bank has “every reason” not to respond as forcefully to higher prices as the Fed.
Lagarde commented that inflation is “clearly weaker” in the euro area, than the US.
She also noted that the economic recovery is not as advanced.
The minutes of the December MPC meeting minutes noted that policymakers viewed the recent and projected increase in inflation was driven by temporary factors.
The ECB, however, is ready to act should price pressures prove to be more persistent.

Norges Bank kept rates unchanged as expected but suggested that a March rate hike is likely.
The bank hiked rates in December and is likely to hike rates quarterly this year.
The Turkish Central Bank paused its rate cutting cycle and kept the repo rate steady at 14% today.
The bank launched an “open-ended” policy review on the back of the recent surge in inflation to its highest in 19 years.
It noted that it would conduct a comprehensive review of its framework to prioritise the depreciating lira.
Turkey has cut rates by 500 bps over 4 consecutive meetings prior to today’s meeting.
Several emerging markets have tightened monetary policy recently to stave off global price pressures.

SA CDS is at 204bps (208bps*), Brazil 218bps (222bps*) and Turkey 528bps (543bps*).
Yields: US 10yr at 1.82% (1.86%*), German bund at -0.039% (-0.012%*) and SA 10-year generic at 9.71% (9.83%*), SA’s R186 is at 7.67% (7.78%*).
The JSE ALSI is up by 0.1% today (+1.6%*).

* Denotes yesterday’s close.

Key events and data tomorrow:

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