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In the loop 06 February 2024

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is stronger this morning, at R19.02/$, after closing weaker yesterday (R19.04/$*).
  • EM currencies were largely down yesterday; the THB (-1.5%), HUF (-1.1%) and PLN (-1.0%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei is down, while the Hang Seng and Shanghai Composite are up.
  • The Reserve Bank of Australia (RBA) has kept its benchmark interest rate unchanged, at 4.35%, as expected.
  • The central bank signalled interest rates as likely to be cut later this year.
  • The bank downwardly revised its medium-term inflation and growth forecasts, while increasing its expectations for unemployment.
  • The RBA noted that “the path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks”.
  • The bank also noted that it expects fewer rate cuts to be implemented in Australia than in peer economies.
  • US Fed Chair Jerome Powell commented yesterday that the Fed is wary of cutting interest rates too soon.
  • Powell noted that consumers might have to wait until after March before seeing interest rate relief.
  • He indicated that policymakers are likely to look for more evidence that inflation is coming down on a sustainable basis before cutting rates.
  • Powell warned that the “danger of cutting too soon is that the job’s not quite done” and that good readings somehow turn out to not be a true indicator of where inflation is heading.
  • Investors will keep an eye on revisions to the US CPI data, scheduled for release on Friday; the data may affect when the Fed will begin its cutting cycle.
  • The BOE’s Chief Economist Huw Pill noted that interest rates are on course to fall this year, as long as inflation moderates as expected.
  • Pill noted that inflation does not need to moderate all the way to 2% before cuts are implemented.
  • He noted that the BOE will keep an eye on wages and services prices.
  • He added that once the bank has seen enough evidence of inflation easing, the bank can begin to reduce the level of restriction in monetary policy in the economy and start to cut rates.
  • Eurozone retail sales for December are due for release today and are likely to have declined by 0.8% y/y, after having fallen by 1.1% y/y in November.
  • Inflation expectations for 1 year and 3 years ahead are also scheduled for release later today.
  • 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 1.4% year-to-date.
  • The gold price is up this morning, and down by 1.8% year-to-date.
  • Brent crude oil is currently at $78.14/bbl; ($77.99/bbl*).
  • Gold is at $2026/oz ($2025/oz*).
  • SA CDS 234bps*, Brazil 137bps* and Turkey 329bps*.
  • Yields: US 10yr at 4.15%*, German bund at 2.31%* and SA 10-year generic at 11.21%*, SA’s R2030 at 9.85%*.

* Denotes yesterday’s close.

Key events and data:

  • 11h00: Eurozone ECB 1 yr and 3 yr inflation expectations (December)
  • 12h00: Eurozone retail sales (December)

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