In the loop

What you should know this morning:

• The rand is weaker this morning, at R18.28/$, after closing stronger yesterday (R18.24/$*).
• EM currencies were mixed yesterday; the COP (-1.0%), MXN (-0.9%) and CLP (-0.8%) were the biggest losers; the PHP (+0.5%), PLN (+0.5%) and BGN (+0.3%) were the biggest gainers.
• Asian equity markets the Nikkei, Hang Seng and Shanghai composite are down.

• Central bank watch: the Bank of Mexico has cut its benchmark interest rate by 50 bps, from 9.50% to 9.00%.
• This follows a 50 bps reduction in February, as policymakers foresee a risk of recession.
• Inflation expectations are stable, albeit just above their inflation target of 3% (with a 1 percentage point tolerance on both sides).
• The bank signalled that further cuts in the coming months might be appropriate.

• Japan’s Tokyo CPI increased more than expected in March.
• The CPI rose 2.9% y/y in March, from 2.8% y/y in February; excluding fresh food, the CPI was up 2.4% y/y in March, after 2.2% in February.
• The Tokyo CPI is seen as a leading indicator for nationwide inflation; the higher-than-expected reading is likely to keep the BOJ leaning towards rate hikes.
• Lingering yen weakness and the increase in input costs, including higher labour costs, have put upward pressure on prices.

• Richmond Fed President Tom Barkin commented that the Trump administration has created “a sense of instability”.
• “Business optimism has dropped. Consumer sentiment has fallen”, Barkin said.
• Barkin remarked that it is best for the Fed to keep rates steady amid the uncertainty caused by rapidly changing trade policy.
• “It’s not an everyday ‘forecasting is hard’ type of fog”, Barkin said; “It’s a ‘zero visibility, pull over and turn on your hazards’ type of fog”.
• He sees the loosening of inflation expectations as a risk that trade policy impacts on inflation might not be transitory.
• “If conditions start to shift, we are well positioned to adjust” he noted; “until then, like businesses and consumers, we are waiting for the fog to clear”.
• Boston Fed President Susan Collins echoed these sentiments, remarking that the Fed should be patient and hold rates “steady for a longer time”.
• She said it looks inevitable that tariffs are going to increase inflation in the near term and it’s uncertain when price increases would start to soften.
• This while the “wait-and-see” stance of business and consumers could lead to weaker economic growth.
• However, Collins noted that it is important to emphasise that growth was still solid at the start of the year.

• US pending home sales picked up in February, after storm-induced weakness in January.
• Pending home sales grew 2.0% m/m in February on the back of calmer weather and a larger selection availability.
• Contract signings, however, remain below normal historical levels as high mortgage rates have dampened demand.
• The Kansas City Fed manufacturing survey showed a smaller contraction in manufacturing activity during March.
• The production activity index increased to -2 in March, from -5 in February.
• Price pressures mounted, with the index for prices paid reaching its highest level since September 2022.
• Firms noted that they expect tariff-related price increases, which may affect their pricing decisions.

• Locally, Treasury will release the monthly budget balance data for February today.
• The SARB’s Biennial Conference, themed “25 Years of Inflation Targeting: Lessons for the Future” continues in Cape Town.
• Yesterday, SARB Governor Lesetja Kganyago again argued for the lowering of SA’s inflation target in his keynote address.
• “Most advanced economies have settled on maintaining inflation targets at 2%, while emerging markets are closer to the 3% mark”, he said.
• “In this respect, the South African target in now rather dated, reducing our competitiveness and opportunity to generate faster and more sustainable growth”, he argued.

• Brent crude is down this morning, and down by 1.1% year-to-date.
• The gold price is up this morning, and up by 17.2% year-to-date.

• Brent crude oil is currently at $73.86/bbl; ($74.03/bbl*).
• Gold is at $3077/oz ($3053/oz*).
• SA CDS 218bps*, Brazil 184bps* and Turkey 319bps*.
• Yields: US 10yr at 4.36%*, German bund at 2.77%*, SA 10-year generic at 10.68%*, SA’s R2035 at 10.67%*.

* Denotes yesterday’s close.

Key events and data:

• 09h00: UK GDP (Q4:24 – final), current account balance (Q4:24), retail sales (February), visible trade balance (January)
• 11h00: Eurozone ECB 1 yr and 3 yr inflation expectations (February)
• 12h00: Eurozone consumer and economic confidence (March)
• 14h00: SA monthly budget balance (February)
• 14h30: US personal income and spending (February)
• 16h00: US University of Michigan sentiment index, 1 yr and 5-10 yr inflation expectations (March – final)
• China BoP current account balance (Q4:24 – final)

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