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Daily Dose

Daily Dose

Good Morning,

On the wires…

  • North Korea Covid-19 outbreak is ‘worrying’ for new variants – WHO
  • Sweden formally applied to join NATO, reports say
  • Musk fights Twitter CEO over spam accounts
  • Flight cancellations avoided as OR Tambo secures 20m litres of jet fuel
  • Bok star Am back in Sharks camp, signs new deal until 2025
  • Liverpool beat Southampton to take title race to final day

Quote of the day…

“Learn from yesterday, live for today, hope for tomorrow. The important thing is to never stop questioning. “ – Albert Einstein

The indicators…

Currency crackdown…

Improved global risk sentiment and a weaker dollar as it pulled back from a 20-year high helped the rand trade below the 16/$ level for the first time in 3-weeks yesterday. The local currency opened our session around the 16.13/$ mark and gradually approached the 16/$ level as the day went by, eventually breaking through and trading as low as 15.88/$ at one point. Hopes that China will ease covid restrictions provided a big boost to sentiment after Shanghai recorded a 4th consecutive day without new infections outside of areas under strict lockdowns ahead of a planned easing of rules set for 1 June. Also providing support were strong US retail sales figures and better than expected industrial production data that initially drowned out fears over rising inflation and a looming recession.

Things are a bit different this morning however, with the dollar making back some lost ground and a rally in equities seemingly running out of steam, while the rand is hovering back around the 16/$ level. This comes on the back of comments from Fed Chair Jerome Powell that the central bank would need to raise rates as inflation continues to run rampant and warned that there could be some pain to come as he repeated projections for 50-basis point hikes in June and July. Similar sentiments were shared by Chicago Fed President Charles Evans and Fed members and James Bullard who all believe that further hikes are the best course forward.

Elsewhere, the pound retreated for a two-week high recorded yesterday after unemployment figures hitting a 48-year low lifted the mood. This started to unwind this morning after UK inflation jumped to 9% in April with a surge in energy prices the main culprit. Also weighing on the currency are plans from its government to unilaterally change some of the terms of its Brexit agreement. EU officials have warned that it may suspend the whole agreement if the UK goes ahead, leading to the immediate imposition of tariffs on UK goods entering the European market and tighter restrictions on UK businesses selling services into the EU.

Looking ahead, this morning’s local consumer inflation release will be closely watched to see if CPI pokes above the SARB’s self-imposed 6% limit. The central bank is already pressure to hike rates to keep pace with developed markets in the face of rising global inflation. Both a 25 and 50-basis-point hike from the SARB have been talked up of late for its next meeting. Any decision will be heavily influenced by whatever figure we see as well as the need avoid stifling already dim growth prospects, which could also be influenced by the release of retail sales figures due later in the day.

On the radar…

  • All – Russia/Ukraine Crisis
  • All – Covid 5th Wave
  • EU – ECB Financial Stability Review
  • EU – ECB Non-Monetary Policy Meeting
  • EU – CPI
  • SA – Core CPI
  • SA – Retail Sales
  • SA – Business Confidence
  • US – Building Permits
  • UK – House Price Index

Did you know?

The Empire State Building has its own ZIP code

Have a great day

Nyiko

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