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In the loop 10 November 2023

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R18.65/$, after closing weaker yesterday (R18.57/$*).
  • EM currencies were mixed yesterday; the COP (+1.4%), CZK (+0.6%) and MXN (+0.3%) were the biggest gainers, the CLP (-1.0%), BRL (-0.6%) and ZAR (-0.6%) were the biggest losers.
  • Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down. 
  • UK GDP for September is due today; it likely stagnated as the impact of tighter monetary policy plays out.
  • GDP is likely to come in at 0% m/m in September, after having increased by 0.2% m/m in August.
  • The BOE had noted previously that more strain was to be expected as only about 50% of the impact of policy tightening has been felt thus far.
  • The data would support the case for the BOE to end its rate hiking cycle but is unlikely to change the central bank’s higher-for-longer stance on rates.
  • Rate cuts are likely only once inflation gets close to the bank’s 2% inflation target, which may only materialise in H2:24.
  • Russia’s CPI for October is expected at 6.7% y/y, from 6.0% y/y in September.
  • At this level, CPI is far above the Bank of Russia’s 4% inflation target.
  • CPI is expected to peak at 8% in Q1:24.
  • The slowdown in credit, however, is expected to reduce demand-side inflationary pressures in the coming months.
  • Atlanta Fed President Raphael Bostic commented yesterday that Fed policy is sufficiently restrictive to steer inflation towards the bank’s 2% inflation target.
  • He noted, however, that it is unlikely to be smooth riding towards the target.
  • Richmond Fed President Thomas Barkin added that, while there are a wide range of potential outcomes for the US economy, he believes that a slowdown is coming.
  • Chicago Fed President Austan Goolsbee remarked that the Fed would need to make sure that higher longer-term bond yields do not slow the economy more than expected.
  • Fed Chair Jerome Powell reiterated that the Fed would continue to move carefully but won’t hesitate to tighten policy further if needed to contain inflation.
  • Moving carefully would allow the Fed to “address both the risk of being misled by a few good months of data, and the risk of overtightening”.
  • While policymakers are committed to ensuring interest rates are high enough to bring inflation down, they are not confident that they have achieved that stance. 
  • The University of Michigan consumer sentiment survey, due for release today, is likely to have slipped in November as households report deteriorating buying conditions for durables.
  • Eskom: daytime loadshedding has been suspended; Stage 2 loadshedding will be implemented at 4pm today.
  • Brent crude oil is up this morning, and down by 6.3% year-to-date.
  • The gold price is down this morning, and up by 7.3% year-to-date.
  • Brent crude oil is currently at $80.47/bbl; ($80.01/bbl*).
  • Gold is at $1957/oz ($1961/oz*).
  • SA CDS 263bps*, Brazil 165bps* and Turkey 376bps*.
  • Yields: US 10yr at 4.62%*, German bund at 2.64%* and SA 10-year generic at 11.58%*, SA’s R2030 at 10.32%*.

* Denotes yesterday’s close. 

Key events and data: 

  • 09h00: UK monthly GDP (September)
  • 17h00: US University of Michigan sentiment, 1 yr and 5-10 yr inflation expectations (November)

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