In the loop 07 May 2025

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R18.22/$, after closing stronger yesterday (R18.17/$*).
EM currencies were mixed yesterday; the THB (+1.2%), CNY (+0.7%) and ZAR (+0.6%) were the biggest gainers; the RON (-1.8%), RUB (-1.3%) and MYR (-0.7%) were the biggest losers.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.

Central bank watch: the Fed’s FOMC interest rate decision is due today; the Fed is largely expected to keep the Fed funds rate unchanged.
The Fed Chair’s news conference following the meeting tomorrow will be closely watched for any changes to the current stance.
The Fed is largely expected to hint that the price-stability leg of its dual mandate will likely take precedence over full employment, for now.
The Brazilian Central Bank (BCB) is expected to hike its Selic rate by 50 bps, to 14.75%.
The BCB is expected to acknowledge that the tariff shock amplifies the uncertainty around the bank’s forecasts.

China today reduced its policy rate and lowered the amount of cash lenders must keep in reserve.
The PBOC cut the seven-day reverse repurchase rate to 1.4%. from 1.5%.
This comes as China ramps up efforts to help the economy affected by the trade war with the US.
Trade talks between China and the US are expected to start this week.
The talks will centre on de-escalation rather than a big trade deal.

US President Trump yesterday commented that he would prescribe the tariff levels and trade concessions for trading partners looking to avoid higher tariffs.
This goes against previous comments that indicated that he would engage in negotiations.
He remarked that the final numbers will likely be “fair” and said that the US is “not looking to hurt countries”.
President Trump and his team have indicated that there could very well be trade deals rolled out this week.
They have yet to announce any formal agreements.

Eurozone retail sales for March are due out today and are expected to have increased by 1.6% y/y, following a 2.3% y/y increase in February.
On a m/m basis, sales are likely to have declined by 0.1% in March, after having increased by 0.3% m/m in February.

Locally, it’s a quiet day as far as data releases are concerned.
Moody’s Ratings agency yesterday lowered SA’s growth forecast to 1.5% for 2025, from 1.7% previously.
This comes on the back of expected slow global growth, driven by tariff uncertainty and trade tensions.
The agency noted that “despite a pause and reduction in some tariffs, policy uncertainty and trade tensions — especially between the US and China — are likely to dampen global trade and investment with consequences across the G20”.

Brent crude oil is currently at $62.72/bbl; ($62.15/bbl*).
Gold is at $3386/oz ($3408/oz*).
SA CDS 236bps*, Brazil 18qbps* and Turkey 347bps*.
Yields: US 10yr at 4.29%*, German bund at 2.54%*, SA 10-year generic at 10.69%*, SA’s R2035 at 10.65%*.

* Denotes yesterday’s close.

Key events and data:

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