In the loop

What you should know this morning:

• The rand is weaker this morning, at R16.34/$, after closing weaker yesterday (R16.33/$*).
• EM currencies were largely down yesterday; the BRL (-1.2%), ARS (-0.9%) and MYR (-0.9%) were the biggest losers; the COP gained 0.3%.
• Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are down.

• Iran war: US messaging has remained more optimistic regarding negotiations.
• President Trump repeatedly suggested that a deal to end the war could be imminent, potentially within days, and insisted that discussions were continuing “continuously,” even as violence persisted.
• However, this optimism was not corroborated by Iranian officials.
• Major disagreements remain over Iran's nuclear programme, sanctions relief and regional security issues.

• Fed Governor Michael Barr yesterday remarked that monetary policy is appropriately calibrated at current levels.
• He described the stance as being “in a good place” and likely to remain unchanged for some time as policymakers assess incoming data.
• His remarks reinforced a “higher-for-longer” bias; Barr signalled that interest rates are expected to stay on hold while the Fed continues to monitor progress on inflation and broader economic conditions.
• Barr emphasised that inflation remains a key concern and that policymakers need clearer evidence of sustained disinflation before considering any easing, implying that patience is warranted.
• His comments suggest confidence that the current policy setting is restrictive enough to guide inflation back towards target.

• New York Fed President John Williams said that US monetary policy is appropriately positioned for now, though he sees no clear indication of where interest rates will move next. 
• He noted that inflation remains elevated, with higher energy prices, tariffs and artificial intelligence-related investment continuing to place upward pressure on prices. 
• However, he also pointed out that services inflation has slowed considerably. 
• Williams added that he currently sees no need for the Fed to either raise or cut interest rates. 
• The Fed has kept rates unchanged so far this year, with its preferred inflation measure standing at 3.8% in April and unemployment at 4.3%. 
• The central bank is scheduled to meet on 16-17 June under the leadership of new Chair Kevin Warsh.

• The US ISM services PMI increased to 54.5 in May, from 53.6 in April, exceeding market expectations and signalling stronger expansion in the services sector. 
• The improvement was driven by a sharp rise in new orders, while businesses also increased inventories amid concerns about ongoing supply disruptions and rising input costs. 
• The survey indicated that firms remained resilient despite uncertainty stemming from the Iran conflict and its effect on global supply chains. 
• However, inflationary pressures intensified further, with the prices paid index climbing to 71.3, the highest in almost four years.
• Employment conditions remained weak, with the employment index contracting for a third consecutive month.
• Many businesses continued to take a cautious approach to hiring.

• The Fed's Beige Book, published yesterday, suggested that the US economy continued to grow at a modest pace in recent weeks. 
• Most districts reported slight increases in economic activity despite a difficult operating environment.
• The report indicated that consumer spending softened in some areas, while business confidence remained cautious amid heightened uncertainty. 
• Labour market conditions were broadly steady, with firms generally keeping staffing levels unchanged rather than pursuing significant hiring or job cuts.
• Businesses in several districts also pointed to higher energy costs stemming from the ongoing Middle East conflict as a major driver of inflationary pressures. 
• Rising fuel prices were feeding through into transportation, shipping, packaging, grocery prices and agricultural inputs such as fertilisers.

• Locally, the electricity production and consumption data for April are scheduled for release today.

• Brent crude is down this morning, and up by 59.5% year-to-date.
• The gold price is up this morning, and up by 3.7% year-to-date.

• Brent crude oil is currently at $97.08/bbl; ($97.81/bbl*).
• Gold is at $4473/oz ($4434/oz*).
• SA CDS 129bps*, Brazil 121bps* and Turkey 240bps*.
• Yields: US 10yr at 4.47%*, German bund at 3.03%*, SA 10-year generic at 8.65%*, SA's R2035 at 8.45%*.

* Denotes yesterday's close.

Key events and data:

• 09h15: SA electricity production and consumption (April)
• 11h00: Eurozone retail sales (April)
• 14h30: US initial jobless claims (30 May)

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