In the loop 19 February 2025

In the loop

Shireen Darmalingam

What you should know this morning:

The rand is stronger this morning, at R18.40/$, after closing unchanged yesterday (R18.41/$*).
EM currencies were mixed yesterday; the COP (+0.8%), BRL (+0.5%) and PEN (+0.3%) were the biggest gainers; the CZK (-0.5%), IDR (-0.4%) and RON (-0.4%) were the biggest losers.
Asian equity markets are mixed this morning; the Nikkei and Hang Seng are down, while the Shanghai Composite is up.

Central bank watch: the Reserve Bank of New Zealand has cut its benchmark interest rate by 50 bps, to 3.75%, to stem the weakness in the economy.
The central bank signalled further easing in the coming quarters to revive the economy.
The Central Bank of Indonesia is likely to hold rates steady, at 5.75%, today.

UK headline CPI for January is in the spotlight today; CPI likely accelerated in January, to 2.8% y/y, from 2.5% y/y in December.
On a m/m basis, CPI is expected to have declined by 0.3% in January, after having increased by 0.3% in December.
Core CPI is expected at 3.7% y/y in January, from 3.2% y/y in December.

Fed President Mary Daly commented yesterday that US monetary policy would need to remain restrictive until there has been further progress on inflation.
Daly expects more improvement on inflation over time.
As such, she said that “there is no reason to be discouraged about the progress on inflation today”.
She reiterated that Fed policymakers should take their time in assessing the impact of the raft of new policies under the Trump administration.

The US NAHB housing market index undershot expectations in February, slipping to 42 (a 5-month low), from 47 in January.
Sentiment declined on concerns of the impact of tariffs on the US economy.
Builder confidence had surged following Trump’s win in November.
Contractors had looked forward to less regulation and the prospect of more economic growth.
However, the expectations index for the next six months fell 13 points to 46 in February, its biggest drop since the start of the pandemic.
Housing starts and building permits for January are due out today; both housing starts and building permits are expected to have decreased in January.
The US Fed FOMC January meeting minutes are due out later this evening.

Locally, Finance Minister Enoch Godongwana is scheduled to table Budget 2025 today.
We expect some fiscal drag (not adjusting income tax thresholds for inflation), which should go a long way in counteracting the additional spending pressures that we foresee.
We do not see an increase in the social grant allocation at this stage; however, government is already reviewing social support in its entirety.
We expect the deficit and debt trajectories to be marginally worse, partly owing to a lower nominal GDP denominator (following the 3Q24 downside surprise in growth).
We expect the government to still project debt stabilisation from this year, albeit at a marginally higher peak.
December retail sales are also on the cards; retail sales came in at 7.7% y/y and 0.8% m/m in November.

Brent crude oil is currently at $75.99/bbl; ($75.84/bbl*).
Gold is at $2928/oz ($2931/oz*).
SA CDS 192bps*, Brazil 165bps* and Turkey 244bps*.
Yields: US 10yr at 4.55%*, German bund at 2.49%*, SA 10-year generic at 10.49%*, SA’s R2035 at 10.50%*.

* Denotes yesterday’s close.

Key events and data:

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