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In the loop 07 February 2024

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R18.84/$, after closing stronger yesterday (R18.83/$*).
  • EM currencies were mixed yesterday; the ZAR (+1.1%), CLP (+0.7%) and MXN (+0.7%) were the biggest gainers; the MYR (-0.4%), IDR (-0.2%) and PLN (-0.1%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei and Hang Seng are down, while the Shanghai Composite is up.
  • Cleveland Fed President Loretta Mester commented yesterday that policymakers are likely to gain confidence to cut interest rates “later this year”, especially if the US economy evolves as expected.
  • Mester, however, noted that there is no need to rush into rate cuts. 
  • Mester concurred with other policymakers that the Fed would want to see further evidence that inflation is easing towards the bank’s 2% inflation goal.
  • She cautioned against lowering rates too soon; Mester expects three rate cuts in 2024.
  • Minneapolis Fed President Neel Kashkari commented that the Fed has made substantial improvement on inflation but indicated more progress as needed. 
  • The National Bank of Poland is expected to hold rates steady, at 5.75%, for a 4th consecutive meeting, today.
  • The Swedish Riksbank meeting minutes of its most recent policy meeting are also on the cards.
  • The minutes will be closely watched for signs as to when the bank will embark on cutting rates.
  • German industrial production data for December, due out today, will offer more insight into the state of Germany’s industry.
  • Industrial production is likely to have declined further, by 2.4% y/y in December, after having fallen by 4.8% y/y in November.
  • Industrial weakness likely impelled Q4:23 GDP weakness.
  • The US trade balance for December is due out today and likely compressed to $62.0bn, from $63.2bn in November.
  • Both exports and imports are expected to have increased in December.
  • Consumer credit data for December likely fell, after having surged in November as the holiday shopping season kicked off.
  • Locally, gross reserves are scheduled for release and are expected to have slipped to $62.40bn in January, from $62.52bn in December.
  • Net reserves likely also slipped, to $56.70bn in January, from $56.90bn in December.
  • SARB Governor Lesetja Kganyago yesterday defended the independence of the monetary authority.
  • The central bank has faced calls for its mandate to be expanded ahead of elections this year.
  • Kganyago noted that “in countries where central banks are captives of the political process, they tend to be willing to fund whatever government wants, or to adjust monetary policy to suit election timetables”.
  • He noted that this comes at a cost to the economy and is “paid with an inflation tax”.
  • Eskom: Stage 2 loadshedding is currently in place until 4pm; Stage 3 loadshedding will be implemented then.
  • Brent crude is up this morning, and up by 2.1% year-to-date.
  • The gold price is down this morning, and down by 1.4% year-to-date.
  • Brent crude oil is currently at $78.66/bbl; ($78.59/bbl*).
  • Gold is at $2035/oz ($2037/oz*).
  • SA CDS 231bps*, Brazil 139bps* and Turkey 325bps*.
  • Yields: US 10yr at 4.10%*, German bund at 2.91%* and SA 10-year generic at 11.18%*, SA’s R2030 at 9.83%*.

* Denotes yesterday’s close.

Key events and data:

  • 08h00: SA gross and net reserves (January)
  • 09h00: Germany industrial production (December)
  • 10h30: Sweden Riksbank MPC meeting minutes (31 January)
  • 14h00: US MBA mortgage applications (2 February)
  • 15h30: US trade balance (December)
  • 22h00: US consumer credit (December)
  • National Bank of Poland interest rate decision – no change expected

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