In the loop 18 July 2024

In the loop

Christelle Grobler

What you should know this morning:

The rand is trading at R18.19/$ this morning, after closing weaker yesterday (R18.25/$*).
EM currencies were mixed yesterday; the CLP (-1.7%), ZAR (-1.0%) and BRL (-1.0%) lost the most; the HUF (+0.7%), THB (+0.6%) and CZK (+0.6%) gained the most.
Asian equity markets are mixed this morning; the Nikkei is down, while the Hang Seng and the Shanghai Composite are up.

Japan’s trade balance recorded a surprise surplus of ¥224.0bn in June, from a deficit of ¥1221.3bn in May.
Weaker import growth was the main driver of the trade surplus, with imports rising 3.2% y/y in June, compared with an increase of 9.5% in May.
Growth in exports has been robust, boosted in part by the weak yen; export growth, however, slowed to 5.4% y/y in June, from 13.5% y/y in May.
Chip-making machines and non-ferrous metals led export gains in June.

The ECB will decide on its policy rate today; no change is expected after the bank commenced with a cutting cycle at its most recent meeting in June.
Policymakers have been at pains to provide guidance that the cutting cycle would progress cautiously and be dependent on the data at hand on a meeting-by-meeting basis.
Eurozone CPI inflation for June was confirmed at 2.5% y/y yesterday, from 2.6% y/y in May.
The bank would want to see further evidence of inflation slowing closer to its target of 2% over time.
Labour productivity growth, to offset still-strong wage growth, is key to subdue inflationary pressures.

US industrial production data for June has come in stronger than expected.
Production at factories, mines and utilities rose 0.6% m/m in June, after rising 0.9% m/m in May; this is the largest back-to-back gains in production since late 2021.
Factory output contributed the most to the gain in overall industrial production in June, increasing 0.4% m/m, following an upwardly revised increase of 1.0% m/m in May.
The increase in manufacturing production was broad-based and saw capacity utilisation at factories rising to 77.9% in June, the highest level since September 2023.
Industrial capacity utilisation, a measure of potential output, rose to 78.8% in June, from 78.3% in May.

Locally, the SARB’s MPC will announce their policy rate decision this afternoon.
The repo rate has been on hold at 8.25% for over a year; at this level, interest rates are restrictive.
A rate cut will likely be contemplated at today’s meeting – but the MPC may hold off on cutting until September.
Inflation is forecast to reach the midpoint of the SARB’s inflation target band imminently, with second-round and wage inflation pressures well contained.
However, medium-term inflation surveyed expectations remain above the midpoint of the target, and the SARB may use this as reason to delay rate cuts.

Brent crude oil is currently at $85.45/bbl; ($85.08/bbl*).
Gold is at $2469/oz ($2456/oz*).
SA CDS 200bps*, Brazil 152bps* and Turkey 263bps*.
Yields: US 10yr at 4.16%*, German bund at 2.42%*, SA 10-year generic at 10.85%*, SA’s R2030 at 9.61%*.

* Denotes yesterday’s close.

Key events and data:

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