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In the loop 21 November 2023

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is stronger this morning, at R18.27/$, after closing weaker yesterday (R18.38/$*).
  • EM currencies were mixed yesterday; the COP (+1.4%), BRL (+1.1%) and RUB (+1.1%) were the biggest gainers, the TRY (-0.2%), ZAR (-0.1%) and INR (-0.1%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei is down, while the Hang Seng and Shanghai Composite are up. 
  • ECB Governing Council member Pablo Hernandez de Cos noted that it would be premature for the bank to start discussions about lowering interest rates.
  • He noted that “the current level of interest rates maintained long enough should be sufficient to achieve our inflation target of 2% in the medium term”.
  • ECB President Christine Lagarde is due to speak on the economy and monetary policy later today.
  • BOE Governor Andrew Bailey commented yesterday that the central bank might have to raise interest rates again. 
  • He warned that food and energy costs remain an upside risk to the inflation outlook.
  • Bailey noted that policymakers are keeping an eye out for “further signs of inflation persistence that may require interest rates to rise again”.
  • He reiterated that it would be too soon to be considering interest rate cuts.  
  • Richmond Fed President Thomas Barkin commented yesterday that US economic data points to an economy that’s expanding while CPI is moderating. 
  • The progress on CPI, however, isn’t sufficient for the Fed to declare victory on inflation.
  • The focus of the Fed, therefore, remains on getting inflation back to the bank’s 2% inflation target.
  • The US FOMC minutes of the 31 October to 1 November meeting are scheduled for release today. 
  • The minutes will likely shed light on why the policy statement and Fed Chair Jerome Powell’s comments were relatively dovish despite strong economic data. 
  • Powell suggested that the previous dot plot from the September FOMC meeting was growing stale, suggesting that policymakers do not see an additional rate hike this year.
  • Investors have been increasingly convinced that the Fed is finished with its hiking cycle, with many seeing a cutting cycle on the cards.
  • US existing home sales for October, due out today, likely declined in October after pending home sales, which leads existing sales by a month or two, declined by an average of 3% from August to September.
  • Existing home sales are likely to have declined by 1.5% m/m in October, after having fallen by 2.0% m/m in September.
  • High mortgage rates have also worsened affordability for homes.
  • The prospect of rate cuts in 2024 may keep prospective buyers on hold for now.
  • Locally, the SARB’s leading indicator for September is scheduled for release today; the index increased to 110.9 in August.
  • The BER’s business confidence index for Q4:23 is also on the cards today; the index is likely to have increased to 38, from 33 in Q3:23.
  • Eskom: Stage 1 loadshedding is currently in place until 4pm; Stage 3 will be implemented then until 5am tomorrow.
  • Brent crude oil is down this morning, and down by 4.5% year-to-date.
  • The gold price is up this morning, and up by 9.2% year-to-date.
  • Brent crude oil is currently at $82.03/bbl; ($82.32/bbl*).
  • Gold is at $1992/oz ($1973/oz*).
  • SA CDS 238bps*, Brazil 150bps* and Turkey 341bps*.
  • Yields: US 10yr at 4.39%*, German bund at 2.61%* and SA 10-year generic at 11.29%*, SA’s R2030 at 10.03%*.

* Denotes yesterday’s close. 

Key events and data: 

  • 09h00: SA SARB leading indicator (September)
  • 12h00: SA BER business confidence index (Q4:23)
  • 17h00: US existing home sales (October)
  • 21h00: US FOMC meeting minutes (31 Oct – 1 Nov)

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