In the loop 12 February 2025

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is weaker this morning, at R18.52/$, after closing weaker yesterday (R18.48/$*).
EM currencies were mixed yesterday; the INR (+0.8%), RUB (+0.7%) and HUF (+0.6%) were the biggest gainers; the THB (-0.5%), IDR (-0.2%) and ZAR (-0.2%) were the biggest losers.
Asian equity markets the Nikkei, Hang Seng and Shanghai Composite are up.

ECB Executive Board member Isabel Schnabel noted yesterday that interest rate cuts cannot solve the region’s structural issues.
This includes high energy prices, a loss of competitiveness, and labour shortages.
Schnabel noted that while Eurozone growth is moderate, uncertainty over trade has increased “dramatically”.
As such, looser monetary policy will likely offer “limited assistance”.
Schnabel remarked that the Europe needs to recalibrate its economy, “particularly after the return of Donald Trump as US President”.

US Fed Chair Jerome Powell delivered his semi-annual monetary policy testimony to the Senate Banking Committee yesterday.
Powell commented that the Fed is no hurry to lower interest rates.
He added that the bank’s monetary policy is now significantly less restrictive than it had been.
Powell noted that policymakers would be patient before lowering borrowing costs further.
He said that “reducing policy restraint too fast or too much could hinder progress on inflation”.
At the same time, “reducing policy restraint too slowly or too little could unduly weaken economic activity and employment”.
He noted that the US economy remains strong, and the labour market is "broadly in balance" — adding that it is "not a source of significant inflationary pressures”.

New York Fed President John Willilams remarked that he expects inflation to slow towards the Fed’s 2% goal.
He expects price growth of around 2.5% this year, before declining to 2% “in the coming years”.
Williams highlighted several signs indicating that inflation would continue to ebb, including a slowdown in wage growth and well-anchored inflation expectations.
He said that it would “take time” before the Fed achieves its 2% goal on a sustained basis.
However, he noted that policy-related uncertainty clouds the economic outlook.
This comes on the back of “potential fiscal, trade, immigration and regulatory policies”.

The US CPI for January will be in focus today; CPI is likely to come in at 2.9% y/y, matching December’s increase.
On a m/m basis, headline CPI is likely to have increased by 0.3% in January, after having increased by 0.4% in December.
Core CPI is expected at 3.1% y/y in January, from 3.2% y/y in December.
Fed Chair Jerome Powell has previously said that the central bank would need to see further “real progress” on inflation or weakness in the labour market to consider adjusting interest rates.

Brent crude oil is currently at $76.70/bbl; ($77.00/bbl*).
Gold is at $2884/oz ($2905/oz*).
SA CDS 204bps*, Brazil 173bps* and Turkey 253bps*.
Yields: US 10yr at 4.54%*, German bund at 2.43%*, SA 10-year generic at 10.52%*, SA’s R2035 at 10.53%*.

* Denotes yesterday’s close.

Key events and data:

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