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In the loop 23 June 2022

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand remains at R15.91/$, after closing slightly weaker at that level yesterday (R15.91/$*).
  • EM currencies were mixed yesterday; the MXN (+0.8%), BGN (+0.4%) and the RON (+0.4%) were the biggest gainers; the BRL (-1.3%), PLN (-0.9%) and CLP (-0.6%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei is down, while the Hang Seng and Shanghai Composite are up.   
  • US Fed Chair Jerome Powell in his testimony to the Senate Banking Committee yesterday said that a soft landing for the US economy would be “very challenging”.
  • Powell noted that the steep rise in interest rates could tip the US economy into recession.
  • He expressed concern that the Fed might not be able to restore price stability and that high inflation would become entrenched.
  • Powell stressed that the bank must to get inflation back to 2%.
  • Policymakers “anticipate that ongoing rate increases will be appropriate” to tame price pressures.
  • Powell said that another 75 bps hike, or 50 bps, was on the table for the July FOMC meeting.
  • The Turkish central bank will meet today and is expected to keep rates unchanged at 14%.
  • This despite the lira weakening, inflation rising, and the rest of the world largely raising interest rates.
  • Inflation rose to 73.5% y/y in May, from 70% y/y in April, taking the real benchmark rate to almost -60%, the lowest among peers by far.
  • Turkey is relying on alternative measures to support the lira, such as introducing revenue-linked bonds and tightening some credit channels.
  • Several countries’ PMI data releases for June are due out today.
  • Eurozone area PMIs have held up reasonably well; however, the Russia-Ukraine war impact on business sentiment might’ve have lowered the composite PMI slightly in June, from 54.8 pts in May.
  • The UK composite PMI is expected to have slipped in June (but remain above the 50pt benchmark).
  • This after the extra national holiday in June (to celebrate the Queen’s Diamond Jubilee).
  • SA has the 30th highest Covid caseload, at 3.989 million; 1,028 new cases were reported yesterday.
  • 18.302 million people, or 45.99% of the SA adult population, have been fully vaccinated.
  • Government has now ended the remaining Covid-19 restrictions, including face masks, curbs on gathering sizes, and border checks for Covid-19.
  • Stage 2 loadshedding will continue today until midnight.
  • Brent crude oil is down this morning, and up by 41.3% year-to-date.
  • The gold price is down this morning, and up by 0.2% year-to-date.
  • Brent crude oil is currently at $109.92/bbl; ($111.74/bbl*).
  • Gold is at $1832/oz ($1838/oz*).
  • SA CDS 283bps*, Brazil 285bps* and Turkey 807bps*.
  • Yields: US 10yr at 3.15%*, German bund at 1.63%* and SA 10-year generic at 10.58%*, SA’s R186 at 8.57%*.

* Denotes yesterday’s close.

Key events and data: 

  • 10h00: Eurozone S&P Global manufacturing, services and composite PMI (June), ECB publishes Economic Bulletin
  • 10h30: UK S&P Global manufacturing, services and composite PMI (June)
  • 14h30: US current account balance (Q1:22), initial jobless claims (18 June)
  • 15h45: US S&P Global manufacturing, services and composite PMI (June)

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