In the loop 06 June 2025

In the loop

Christelle Grobler

What you should know this morning:

The rand is trading at R17.75/$ this morning, after closing stronger yesterday (R17.74/$*).
EM currencies were mixed yesterday; the RUB (+2.6%), BRL (+0.9%) and KRW (+0.7%) were the biggest gainers; the ARS (-0.4%), PEN (-0.3%) and TRY (-0.2%) were the biggest losers.
Asian equity markets are mixed this morning; the Nikkei is up, while the Hang Seng and Shanghai Composite are down.

Japan’s household spending contracted unexpectedly in April.
Household spending declined 0.1% y/y in April, after growing at 2.1% y/y in March.
High inflation likely deterred discretionary consumer spending.
Spending on necessities such as housing was up 10.9% y/y in April, illustrating the rising cost of living pressure on household budgets.
Further, the weakness in the economy may be more broad-based, with the leading indicator for April declining to 103.4, from a downwardly revised 107.6 in March.
The coincident indicator came in at 115.5 in April, from 115.8 in March.

Fed Governor Adriana Kugler has argued for interest rates to remain steady if upside risks to inflation remain in place.
Kugler is worried about the impact of tariffs on inflation, noting her main focus as currently on inflation, not the potential slowdown in the economy.
She noted that pass-through of tariffs to prices can be “relatively quick” and that if “elevated tariffs persist, even just in the short run, larger effects may be coming soon”.
Kugler highlighted three channels through which tariffs could persistently impact inflation: higher short-term inflation expectations, opportunistic price increases and lower productivity.
“I don’t think it is as clear that one can look through these tariffs and that it would be a one-shot thing or a temporary phenomenon”, Kugler warned.
Kugler noted the stability in longer-term inflation expectations indicators.
“That provides me some comfort, as it points to confidence from the public in the Fed to bring inflation to our goal of 2% over the medium term”, she said.
The FOMC meets on June 17 and 18, when its widely expected to hold its policy rate steady.
President Donald Trump continues to put pressure on the Fed to cut interest rates, most recently after May’s dismal ADP employment numbers, released on Wednesday.

US non-farm payrolls data for May will be in the spotlight today.
The monthly increase in non-farm payrolls likely came under pressure in May.
Payrolls are expected to have risen by 126k in May, down from an increase of 177k in April.
The unemployment rate likely held steady, at 4.2%, in May.

Locally, official gold and foreign exchange reserves for May will be out this morning.
Gross reserves stood at $67.58bn on 30 April, up slightly from $67.45bn at the end of March.
The increase was mostly as a result of the higher US dollar gold price.
Net reserves increased to $64.32bn in April, from $63.17bn in March.

Brent crude oil is currently at $65.12/bbl; ($65.34/bbl*).
Gold is at $3369/oz ($3353/oz*).
SA CDS 199bps*, Brazil 161bps* and Turkey 304bps*.
Yields: US 10yr at 4.39%*, German bund at 2.58%*, SA 10-year generic at 10.08%*, SA’s R2035 at 10.03%*.

* Denotes yesterday’s close.

Key events and data:

Read PDF