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Closing the loop 12 January 2022

Closing the loop

Shireen Darmalingam

Market highlights:

  • The rand is stronger, at R15.37/$ (R15.56/$*) today; it ranged between R15.35/$ and R15.56/$.
  • The currency is below its 50-day moving average (R15.73/$) and above its 100-day and 200-day moving averages (R15.25/$ and R14.78/$ respectively).
  • EM currencies were mixed today; the ZAR (+1.2%), HUF (+0.9%) and TRY (+0.8%) were amongst the biggest gainers; the IDR (-0.1%), PHP (-0.1%) and ARS (-0.1%) were amongst the biggest losers.
  • US CPI increased to 7.0% y/y in December, as expected, from 6.8% y/y in November.
  • The increase was driven by higher food prices while energy prices were down.
  • The core index, which excludes energy prices, also rose in December, to 5.5% y/y from 4.9% y/y.
  • Supply chain disruption are likely to keep prices elevated into 2022; a further increase in CPI is expected in January.
  • The data will likely heighten the debate over when the Fed will start hiking rates with expectations increasing for a March lift-off.
  • The Fed meets next week to decide on rates and policy going forward; policymakers are also calling for balance sheet reduction to begin earlier.  
  • Markets will keep an eye on the Fed’s Beige Book for clarity on the economy’s performance.
  • The World Bank lowered its GDP growth forecast for the US to slow to 3.7% in 2022 from 5.6% in 2021; and 2.6% in 2023.
  • This comes on the back of the impact of the Omicron variant, supply-chain disruptions, labour concerns and the withdrawal of government support.
  • The World Bank highlighted a notable risk of a hard landing for the developed world in 2022
  • The bank only sees advanced economies returning to pre-pandemic growth by 2023.
  • Locally, it was a quiet day on the economic front.
  • Electricity production and consumption data for November are scheduled for release tomorrow.
  • The oil price is up by 0.5% today, and up by 8.2% in the year-to-date.
  • The gold price is up by 0.3% today, and down by 0.4% in the year-to-date.
  • Brent crude oil is at $84.16/bbl ($83.72/bbl*).
  • Gold price is at $1822/oz ($1817/oz*).
  • SA CDS is at 195bps (200bps*), Brazil 212bps (216bps*) and Turkey 574bps (580bps*).
  • Yields: US 10yr at 1.73% (1.73%*), German bund at -0.049% (-0.027%*) and SA 10-year generic at 9.87% (9.94%*), SA’s R186 is at 7.81% (7.88%*).
  • The JSE ALSI is up by 2.4% today (+0.2%*).

* Denotes yesterday’s close. 

Key events and data tomorrow:

  • 08h00: Japan machine tool orders (December)
  • 13h00: SA electricity production and consumption (November)
  • 15h30: US PPI (December), initial jobless claims (8 January)

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