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In the loop 15 August 2022

In the loop

Shireen Darmalingam

What you should know this morning:

  • The rand is weaker this morning, at R16.24/$, after closing stronger on Friday (R16.16/$*).
  • EM currencies were mixed on Friday; the COP (+1.6%), BRL (+1.6%) and CLP (+1.0%) were the biggest gainers; the RUB (-1.2%), BGN (-0.7%) and CZK (-0.7%) were the biggest losers.
  • Asian equity markets are mixed this morning; the Nikkei is up, while the Hang Seng and Shanghai Composite are own.   
  • Japan’s Q2:22 GDP was 2.2% q/q, from a 0.1% q/q increase in Q1:22, having reclaimed the pre-pandemic level.
  • Private consumption and business investment were the main drivers of growth in Q2:22. 
  • This was supported by pent-up demand after virus restrictions were lifted in March. 
  • Public spending also supported growth in Q2:22.
  • Housing investment, however, fell during the quarter due to rising construction costs.
  • The People’s Bank of China (PBOC) in a surprise move has cut a key policy interest rate for the first time since January 2022.
  • The central bank also lowered the rate on its one-year policy loans by 10 bps, to 2.75%
  • This as the bank tries to ramp up support for an economy battling to recover from Covid lockdowns and a property market downturn. 
  • This cut now widens the divergence between the PBOC’s easing stance and other major central banks that have embarked on tightening policy to curb rising inflation. 
  • In the US, the Fed’s FOMC July meeting minutes are scheduled for release on Wednesday and may help reset expectations around the path and magnitude of rate hikes.
  • The minutes are likely to highlight that the Fed still has a long way to go in its tightening cycle
  • The FOMC minutes may also provide other clues as to what policymakers need see to determine the size of their next move. 
  • The Empire manufacturing index for August is due out today, and is expected to have fallen to 5.0 from 11.1 in July.
  • The NAHB housing market index for August is also due today, and is expected have remained steady, at 55.
  • US retail sales for July are due out on Wednesday; both the headline and ex-auto and gas sales may show gains in July. 
  • UK inflation is in the spotlight this week; CPI is expected to have increased to 9.8% y/y in July, from 9.4% y/y in June.
  • The BOE expects CPI to peak at 13.3% in October.
  • There are also reports covering unemployment, wage growth and retail sales due out this week.
  • In the Eurozone, follow-up readings on GDP and inflation are due this week.
  • Locally, retail sales for June are scheduled for release on Wednesday and are expected to have fallen by 0.1% y/y following a 0.1% y/y gain in May.
  • Brent crude oil is down this morning, and up by 24.8% year-to-date.
  • The gold price is down this morning, and down by 2.0% year-to-date.
  • Brent crude oil is currently at $97.08/bbl; ($98.15/bbl*).
  • Gold is at $1792/oz ($1802/oz*).
  • SA CDS 234bps*, Brazil 248bps* and Turkey 657bps*.
  • Yields: US 10yr at 2.83%*, German bund at 0.98%* and SA 10-year generic at 10.38%*, SA’s R186 at 8.59%*.

* Denotes Friday’s close. 

 Key events and data: 

  • 14h30: US Empire manufacturing (August)
  • 16h00: US NAHB housing market index (August)

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