In the loop

What you should know this morning:

• The rand is stronger this morning, at R15.95/$, after closing weaker yesterday (R15.98/$*).
• EM currencies were mixed yesterday; the MYR (+0.4%), TWD (+0.2%) and PHP (+0.2%) were the biggest gainers; the COP (-1.3%), CLP (-0.8%) and RUB (-0.7%) were the biggest losers.
• Asian equity markets are mixed this morning; the Nikkei and Hang Seng are down, while the Shanghai Composite is up.

• Iran war: tensions remain elevated as Washington intensified economic pressure on Tehran through a new sanctions campaign aimed at further isolating Iran and its trading partners.
• Iranian officials insisted that the country would not yield to what they described as an “economic war” and warned that additional US pressure could trigger further retaliation against Gulf energy supplies and shipping.

• Trade wars: the US-Canada dispute has moved firmly into a tit-for-tat trade war after negotiations collapsed last week. 
• Canada confirmed that it would impose 15%, 25% and 50% counter-tariffs on C$27.6bn of US goods from 8 September.
• This matches the new US tariffs dollar-for-dollar and rate-for-rate.
• Targeted sectors include steel and aluminium, dairy, appliances, agricultural equipment, pulp and paper, and electronics. 

• Central bank watch: the Bank of Korea hike its benchmark interest rate by 25 bp, to 3.00%, today as underlying inflation builds on the back of AI-driven growth.
• The Philippines central bank may also raise rates as inflation remains well above target.
• The ECB will publish the minutes of its 22-23 July policy meeting today.
• The ECB meeting minutes should provide more details on how close the Governing Council was to further tightening and how policymakers assessed the inflationary consequences of the Middle East energy shock. 
• Investors are keeping a close eye on whether policymakers viewed a September hike as a one-off response to the energy shock or potentially the start of a longer hiking cycle. 
• The ECB held the deposit rate at 2.25% in July, stressing that the full inflation impact of higher energy prices has yet to emerge. 

• Richmond Fed President Tom Barkin described the Fed's July decision to leave interest rates unchanged as a “close call”.
• Policymakers are continuing to assess whether current policy is sufficiently restrictive to bring inflation back to 2%.
• Barkin said that there was a case for keeping rates steady as inflation eases but acknowledged that further tightening might be needed if price pressures should become more entrenched. 
• He noted that the Fed will be receiving another full set of economic data before its September meeting, which would help determine the appropriate policy stance. 

• Today sees the release of the US advance goods trade balance for July; the trade deficit is expected to have narrowed to $100.5bn, from a deficit of $101.4bn in June.

• Locally, the July PPI is due out today and is expected at 6.0% y/y, after having increased by 7.5% y/y in June.
• On a m/m basis, PPI is likely to have decreased by 0.9% in July, following a 0.1% decline in June.

• Oil prices fell further yesterday, extending declines from the previous session as reports pointed to progress in diplomatic efforts to halt hostilities in the Middle East and restore shipping through the Strait of Hormuz.
• Reports suggested that the US and Iran were close to reaching a new ceasefire agreement. 
• This could be announced in the coming days and would include provisions for free navigation through the Strait. 
• Meanwhile, Iran and Oman held talks on establishing a “temporary joint maritime corridor” that should allow some shipping through the critical waterway to resume. 
• The prospect of a ceasefire and improved shipping flows eased concerns over potential supply disruptions, putting further downward pressure on crude prices.
• Brent crude is down this morning, and up by 43.5% year-to-date.
• The gold price is up this morning, and up by 6.8% year-to-date.

• Brent crude oil is currently at $87.35/bbl; ($87.84/bbl*).
• Gold is at $4615/oz ($4591/oz*).
• SA CDS 116bps*, Brazil 119bps* and Turkey 219bps*.
• Yields: US 10yr at 4.64%*, German bund at 3.23%*, SA 10-year generic at 8.65%*, SA's R2035 at 8.43%*.

* Denotes yesterday's close. 

Key events and data:

• 08h00: Japan machine tool orders (July – final)
• 10h00: Eurozone M3 money supply (July)
• 11h30: SA PPI (July)
• 13h30: Eurozone ECB meeting minutes (22-23 July)
• 14h30: US advance goods trade balance (July), initial jobless claims (22 August)

Read PDF