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In the loop 09 April 2025

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R19.78/$, after closing weaker yesterday (R19.64/$*).
  • EM currencies were mixed yesterday; the PLN (+0.5%), CZK (+0.3%) and PHP (+0.2%) were the biggest gainers; the IDR (-2.8%), THB (-1.7%) and BRL (-1.6%) were the biggest losers.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.
 
  • Central bank watch: The Reserve Bank of New Zealand (RBNZ) today cut its benchmark interest rate by 25 bps, to 3.5%.
  • The RBNZ noted that it is ready to step up the pace of easing on the back of the US’s reciprocal tariff announcement last week.
  • The central bank noted significant downside risks to global growth and the outlook for domestic inflation.
 
  • BOE Deputy Governor Clare Lombardelli warned that tariffs will depress UK economic growth.
  • She added that the impact of these tariffs on inflation is unclear.
  • Lombardelli indicated that policymakers will consider heightened uncertainty and weakening growth when they decide whether to cut interest rates again.
 
  • President Trump yesterday indicated that he would proceed with implementing tariffs, of 104%, on many Chinese goods today.
  • These tariffs include previous levies applied because of the fentanyl crisis, Trump’s reciprocal tariffs, as well as an additional retaliation announced (of 50%) after China said it would tax US exports to China.
  • China has signalled it would not back down from a trade war.
 
  • Chicago Fed President Austan Goolsbee commented that Fed policymakers may not be able to wait for the economic impact of tariffs to reflect in the data.
  • He urged that policymakers should instead take active steps to gauge the effects in real time. 
  • He added that businesses are already reporting anxiety and uncertainty about what tariffs will look like in the economy.
  • Businesses are challenged with how much of the tariff costs they would be able to pass on to consumers.
  • They are particularly concerned about how fast prices will likely increase. 
 
  • San Francisco President Mary Daly remarked that the Fed can take its time before making any adjustments to interest rates.
  • Daly said that it would be best to wait and see how trade policy changes play out. 
  • She noted that policy is in a good place to stay modestly restrictive, “but not so restrictive that the economy is vulnerable”.
 
  • The minutes of the Fed’s FOMC meeting (18-19 March) is in the spotlight today.
  • The markets will keep a close eye on clues for when the FOMC might cut rates again. 
  • The minutes are likely to show that the majority of FOMC policymakers were more worried about the persistence of inflation.
  • Fed Chair Jerome Powell commented that the Trump administration’s new tariffs are “significantly larger than expected,” and their inflation impact “could be more persistent”.
  • The Fed chair is faced with the challenge of cutting interest rates further to prevent a sharp economic slowdown, or to keep them at the current level to pre-empt a surge in inflation.
  • Markets are expecting further rate cuts.
 
  • Locally, it’s a quiet day as far as data releases are concerned.
 
  • Brent crude is down this morning, and down by 19.0% year-to-date.
  • The gold price is up this morning, and up by 14.9% year-to-date.
 
  • Brent crude oil is currently at $60.46/bbl; ($62.82/bbl*).
  • Gold is at $3014/oz ($2986/oz*).
  • SA CDS 265bps*, Brazil 198bps* and Turkey 348bps*.
  • Yields: US 10yr at 4.29%*, German bund at 2.63%*, SA 10-year generic at 10.97%*, SA’s R2035 at 10.95%*.
 

* Denotes yesterday’s close.

Key events and data: 

  • 08h00: Japan machine tool orders (March)
  • 13h00: US MBA mortgage applications (4 April)
  • 20h00: US FOMC meeting minutes (18-19 March)
 

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