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Closing the loop 21 June 2022

Closing the loop

Market highlights:

  • The rand is stronger at R15.85/$ (R16.04/$*) today; it ranged between R15.83/$ and R16.06/$.
  • The currency is below its 50-day, 100-day and 200-day moving averages (R15.69/$, R15.35/$ and R15.37$ respectively).
  • EM currencies are mixed today with a post-election slump in the COP (-3.1%); the ARS (-0.9%) and PHP (-0.6%) are the other biggest losers while the ZAR (+1.0%), BRL (+0.9%) and RUB (+0.7%) gained the most.
  • The current account deficit of the euro area widened to EUR5.8b in April, from a deficit of EUR1.6b during March.
  • Deficits were recorded for income (mostly dividend and interest payments) as well as goods in April, which was partly offset by a surplus for services.  
  • In the 12 months to April, the current account recorded a surplus of 1.5% of euro area GDP.
  • US existing home sales slowed slightly less than expected, declining 3.4% m/m during May after a drop of 2.6% (revised from -2.4%) in April.
  • May is the fourth straight month of decline as mortgage rates head higher.
  • Tomorrow sees the release of UK inflation data for May; CPI inflation is expected to print 9.1% y/y, after reaching a 40-year high of 9% in April.
  • Earlier today, BOE Chief Economist Huw Pill said that the BOE stands ready to act “more aggressively” to lean against “self-sustaining momentum” in inflation, even if growth must be sacrificed.
  • Locally, the SARB’s composite leading business cycle indicator declined to 126.7 in April from March’s reading of 127.1 (revised down from 128).
  • The indicator is down 4.7% y/y and 0.3% m/m in April – the largest contraction on an annual basis since May 2020; the level of the leading indicator is now in line with January this year.
  • Five out of the available 10 components detracted from the composite indicator.
  • A deceleration in the growth rate of new passenger cars (six-month smoothed) and a decline in the US dollar-denominated SA export commodity index made the biggest negative contributions. Faster job advertisement growth (six-month smoothed) and a higher interest rate spread shored it up the most.
  • SA CPI for May is due tomorrow; CPI inflation likely reached the inflation target ceiling of 6% y/y.
  • Consensus expectations are for CPI at 6.1% y/y and 0.3% m/m, from 5.9% y/y and 0.6% m/m in April.
  • Core CPI is expected at 4.1% y/y (after coming in at 3.9% y/y in April) on the back of further acceleration in services inflation.
  • Eskom will again implement Stage 2 loadshedding from 17h00 to 22h00 this evening.
  • The oil price is up by 1.0% today, and up by 48.4% in the year-to-date.
  • The gold price is up by 0.2% today, and up by 0.6% in the year-to-date.
  • Brent crude oil is at $115.06/bbl ($114.13/bbl*).
  • Gold price is at $1839/oz ($1835/oz*).
  • SA CDS is at 283bps (285bps*), Brazil 282bps (284bps*), Turkey 812bps (821bps*).
  • Yields: US 10yr at 3.28% (3.22%*), German bund at 1.76% (1.74%*) and SA 10-year generic at 10.62% (10.69%*), SA’s R186 is at 8.57% (8.66%*).
  • The JSE ALSI is up 0.4% today (1.5%*).

* Denotes yesterday’s close.

Key events and data:

  • 08h00: Japan machine tool orders (May)
  • 08h00: UK CPI, PPI, RPI (May)
  • 10h00: SA CPI (May)
  • 10h30: UK house price index (April)
  • 16h00: Eurozone consumer confidence (June preliminary)

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