In the loop

What you should know this morning:

• The rand is weaker this morning, at R16.17/$, after closing weaker yesterday (R16.15/$*).
• EM currencies were mixed yesterday; the COP (+1.9%), BRL (+0.6%) and PEN (+0.3%) were the biggest gainers; the HUF (-0.9%), RUB (-0.7%) and CZK (-0.5%) were the biggest losers.
• Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.

• Iran war: renewed diplomatic efforts to prevent a broader escalation, after the first direct exchange of fire between the US and Iran in nearly a month, are underway.
• The Iranian president has said that Tehran would be prepared to return to the terms of the June memorandum of understanding if Washington also honoured its commitments.

• Central bank watch: the Reserve Bank of New Zealand has raised its benchmark interest rate by 25 bps, to 2.75%.
• The central bank noted gradually removing monetary stimulus as appropriate to return inflation to the 2% inflation target mid-point.
• The Bank of Canada is likely to hold its policy rate at 2.25% today as core inflation remains contained and the labour market continues to show signs of growth.

• ECB Governing Council member Joachim Nagel said yesterday that the slowdown in underlying inflation in the Eurozone in August was a positive development.
• Nagel noted that the decline in core inflation has been accompanied by an easing in services inflation.
• He added that policymakers were not yet seeing second-round effects in core inflation.
• Nagel described the outlook for next week's interest rate decision as “relatively predictable.”
• ECB Governing Council member Gediminas Simkus said that a single interest rate increase next week would not be sufficient to bring inflation back to target.
• Given the current data, he said that the bank would likely hike rates at the September meeting.
• Simkus cited rising natural gas futures, higher agricultural commodity prices, and a stronger-than-expected economy as reasons to believe that the outlook for consumer prices may be shifting higher.

• Fed Governor Michael Barr yesterday warned that the Fed may need to raise interest rates if inflation does not show clearer signs of moderating towards the 2% target.
• Barr noted that policymakers can afford to remain patient if incoming data show signs that inflation is cooling.
• However, the Fed should act decisively, should price pressures remain persistent.
• Fed officials remain divided over the outlook, with some expecting inflation to moderate without the need for further tightening.
• Others, including Barr, would want to see clearer evidence of progress on inflation to justify keeping rates unchanged.

• The US ISM manufacturing PMI remained in expansion in August, albeit slipping to 54.6, from 55.6 in July. 
• Growth moderated as the new orders index declined to 53.7 in August, from 56.7 in July, indicating some cooling in demand; the production index remained robust, at 58.3.
• The employment index also stayed in expansion, at 51.2 in August, implying continued, albeit slower, hiring in the sector.
• Meanwhile, the prices paid index held at an elevated 71.1, underscoring persistent cost pressures faced by manufacturers.
• Overall, the data points to a manufacturing sector that remains resilient despite signs of slower momentum.

• The US ADP private sector payroll report for June is due out today; private payrolls are expected to have increased by 47k in August, after having increased by 44k in July.
• Factory orders are likely to have increased by 0.7% m/m in July, following a 0.3% m/m decrease in June.
• Durable goods orders for July (final estimate) are expected to have remained unchanged, at 1.1% m/m, from a 0.5% m/m increase in June.
• The Fed's Beige book is also due out today; it is expected to point to a continued pickup in economic activity, with the improvement particularly evident in manufacturing.

• Locally, the BER will release the business confidence index for Q3:26 today; the index is expected to have improved to 42 in Q3:26, from 39 in Q2:26.

• Brent crude is up this morning, and up by 56.8% year-to-date.
• The gold price is down this morning, and down by 0.4% year-to-date.

• Brent crude oil is currently at $95.52/bbl; ($94.65/bbl*).
• Gold is at $4303/oz ($4328/oz*).
• SA CDS 115bps*, Brazil 121bps* and Turkey 219bps*.
• Yields: US 10yr at 4.80%*, German bund at 3.34%*, SA 10-year generic at 8.86%*, SA's R2035 at 8.66%*.

* Denotes yesterday's close. 

Key events and data:

• 10h30: SA BER business confidence index (Q3:26)
• 13h00: US MBA mortgage applications (August)
• 16h00: US factory orders (July), durable goods orders (July)
• 20h00: US Fed Beige Book

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