In the loop

What you should know this morning:

• The rand is weaker this morning, at R17.97/$, after closing weaker yesterday (R17.95/$*).
• EM currencies were mixed yesterday; the RUB (+0.5%) and BRL (+0.1%) were the biggest gainers; the ARS (-1.9%), CLP (-1.1%) and COP (-1.0%) were the biggest losers.
• Asian equity markets are mixed this morning; the Nikkei is up, while the Hang Seng and Shanghai Composite are down.

• Central bank watch: the US Fed has kept the Fed funds rate unchanged, as expected, despite significant pressure from President Trump to lower borrowing costs. 
• The Fed cited a “solid” labour market and “somewhat elevated” inflation. 
• Two FOMC policymakers dissented with the central bank’s decision.
• The Fed noted though that growth had “moderated” in the first half, which implies that officials may be moving towards supporting cuts at future meetings.  
• Fed Chair Jerome Powell commented that the Fed is well-positioned, for now, given lingering uncertainties surrounding President Trump’s tariffs and their economic impact.

• The Bank of Japan today kept its benchmark interest rate unchanged, at 0.5%.
• The central bank signalled that it may be closer to a rate hike after raising its inflation outlook.

• The SARB will announce its interest rate decision today; market expectations are for a 25bps cut in the repo rate, to 7.0%.
• The cut is expected given subdued inflation and growth, though the interest rate outlook is still clouded by the persistent uncertainty about a possible lowering of the inflation target.
• We will keep an eye on changes to the bank’s growth and inflation outlook.

• President Trump yesterday confirmed a 25% tariff plus a penalty on India, effective Friday 1 August.
• President Trump added an unspecified “penalty” — in addition to the 25% for India’s purchases of Russian weapons and energy.
• The US also reached a trade agreement with South Korea that will impose a 15% tariff on imports, including autos.
• He reiterated that the 1 August deadline for trade deals would not be extended.
• Countries who have not been able to secure a deal by then could face a new baseline tariff rate of as much as 20%.

• China’s manufacturing PMI slipped in July, to 49.3, from 49.7 in June.
• The non-manufacturing PMI fell to 50.1 in July, from 50.5 in June.
• The composite PMI also fell in July, to 50.2, from 50.7 in June.

• US personal income and spending for June are scheduled for release today.
• Personal income is expected to have increased by 0.2% m/m in June, from a 0.4% m/m decline in May.
• Personal spending is also expected to have increased by 0.4% m/m in June, from a 0.1% m/m decline in May.
• The Fed’s preferred inflation gauge, the core PCE deflator, is likely to show more rapid inflation than June’s CPI report.

• Locally, the June PPI is due out today and is expected to come in at 0.6% y/y, after having increased by 0.1% y/y in May.
• On a m/m basis, PPI is expected to have increased by 0.2% in June, following a 0.3% decline in May.
• The June trade balance is also scheduled for release; a trade surplus of R25.2bn is expected, from R21.7bn in May. 

• Brent crude is down this morning, and down by 2.1% year-to-date.
• The gold price is up this morning, and up by 25.6% year-to-date.

• Brent crude oil is currently at $73.05/bbl; ($73.24/bbl*).
• Gold is at $3296/oz ($3275/oz*).
• SA CDS 183bps*, Brazil 151bps* and Turkey 276bps*.
• Yields: US 10yr at 4.37%*, German bund at 2.70%*, SA 10-year generic at 9.87%*, SA’s R2035 at 9.79%*.

* Denotes yesterday’s close.

Key events and data: 

• 11h00: Eurozone unemployment rate (June)
• 11h30: SA PPI (June)
• 14h00: SA trade balance (June)
• 14h30: US personal income and spending (June), initial jobless claims (26 July)
• 15h00: SA SARB interest rate decision – 25 bps cut expected

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