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In the loop 25 November 2021

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is stronger this morning, at R15.88/$, after closing weaker yesterday (R15.92/$*).
  • EM currencies were mixed yesterday; the TRY (+4.5%), PHP (+0.5%) and KRW (+0.3%) were amongst the biggest gainers; the RUB (-0.9%), THB (-0.7%) and MXN (-0.7%) were amongst the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei and Hang Seng are up, while the Shanghai Composite is down.
  • US FOMC meeting minutes: policymakers are open to removing policy support at a faster pace to contain inflation.
  • Policymakers added that the committee should be ready to adjust the tapering pace and raise the Fed funds rate sooner should inflation continue to surge. 
  • The minutes showed that officials “generally continued to anticipate that the inflation rate would diminish significantly during 2022”.
  • Several policymakers, however, suggested that inflation could prove more persistent.
  • Inflation has risen since the 3 November meeting.
  • Completing the taper at an earlier date would give the Fed the option to raise interest rates to keep inflation in check.
  • Vice Chair Richard Clarida noted that it would be appropriate to discuss the speed of tapering at the December FOMC meeting.
  • Despite rising inflation, US consumer spending jumped 1.3% m/m in October, from 0.6% m/m in September.
  • Personal income climbed 0.5% m/m in October, from a 1.0% m/m decline in September.
  • This comes even as the government’s assistance to workers during the pandemic subsided further in October.
  • ECB policymakers expect inflation to recede in 2022.
  • However, they noted that the bank can't afford to be complacent should surging inflation persist.
  • They added that the bank should not commit to loose monetary policy for too long amid the uncertain outlook.
  • Factors that have been driving inflation in Europe are becoming more structural and more entrenched, according to officials.
  • The ECB’s MPC meeting minutes are due out today. 
  • The SARB’s Financial Stability Review noted that the SA financial cycle has shifted to an upward phase for the first time in 5 years.
  • Equity and house prices have moved above their trend levels; this helped lift the cycle into an upward phase.
  • The bank noted that growth in loans to the private sector, real-estate and equity prices turned positive in Q2:21. 
  • The review noted that financial market conditions are stable and that large financial institutions have maintained sizable solvency and liquidity buffers.
  • Brent crude oil is up this morning, and up by 59.0% year-to-date.
  • The gold price is up this morning, and down by 5.6% year-to-date.
  • Brent crude oil is currently at $82.39/bbl; ($82.25/bbl*).
  • Gold is at $1792/oz ($1785/oz*).
  • SA CDS 223bps*, lower than Brazil 250bps* and Turkey 475bps*.
  • Yields: US 10yr at 1.63%*, German bund at -0.228%* and SA 10-year generic at 10.16%*, SA’s R186 at 8.17%*.

* Denotes yesterday’s close.

Key events and data:

  • 08h00: Japan machine tool orders (October)
  • 11h30: SA PPI (October)
  • 14h30: Eurozone ECB publishes October MPC minutes

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