Closing the loop

Market highlights:

• The rand is stronger, at R15.61/$ (R15.70/$*) today; it ranged between R15.55/$ and R15.71/$.
• The currency is below its 50-day moving average (R15.74/$) and above its 100-day and 200-day moving averages (R15.24/$ and R14.77/$ respectively).
• EM currencies were mixed today; the THB (+0.6%), ZAR (+0.5%) and COP (+0.5%) were amongst the biggest gainers; the CZK (-0.4%), TRY (-0.1%) and ARS (-0.1%) were amongst the biggest losers.

• Bank of Atlanta Fed President Raphael Bostic noted that the Fed may need to raise interest rates as soon as March.
• He also noted that the bank needs to start reducing its balance sheet soon after it hikes rates to contain rising inflation.
• Bostic expects three rate increases this year.
• His views incorporate a growing economy, an improved labour market and surging inflation which has surprised to the upside.
• The December meeting minutes noted that a stronger economy and higher inflation could warrant rate hikes “sooner or at a faster pace”.
• Focus is now on the December CPI print due out tomorrow as well as the Fed’s Beige Book.
• The FOMC meets later this month.

• China’s December CPI data is due out tomorrow and is expected to have moderated to 1.7% y/y from 2.3% y/y in November.
• Food prices are expected to be the main driver behind the moderation.
• Non-food components are also expected to have slowed in December.
• PPI is expected to come in at 11.3% y/y in December from 12.9% y/y in November.

• Locally, manufacturing production fell less than expected in November by 0.7% y/y from an 8.5% y/y fall in October. 
• On a m/m basis, production was up by 3.7% in November from a 5.2% decline in October.
• The improvement comes on the back of an end to strike activity in the steel industry which adversely impacted overall manufacturing output. 
• Production is expected to increase on improved economic activity.

• The oil price is up by 1.6% today, and up by 5.6% in the year-to-date.
• The gold price is up by 0.3% today, and down by 1.3% in the year-to-date.

• Brent crude oil is at $82.11/bbl ($80.87/bbl*).
• Gold price is at $1805/oz ($1799/oz*).

• SA CDS is at 195bps (200bps*), Brazil 212bps (216bps*) and Turkey 574bps (580bps*).
• Yields: US 10yr at 1.75% (1.76%*), German bund at -0.046% (-0.034%*) and SA 10-year generic at 9.98% (9.91%*), SA’s R186 is at 7.92% (7.93%*).
• The JSE ALSI is up by 0.2% today (-0.2%*).

* Denotes yesterday’s close. 

Key events and data tomorrow:

• 01h50: Japan current account and trade balances (November)
• 03h30: China CPI, PPI (December)
• 12h00: Eurozone industrial production (November)
• 14h00: US MBA mortgage applications (7 January)
• 15h30: US CPI (December)
• 21h00: US Fed Beige Book

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