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Reuters: South Africa’s rand and stocks lost over 1% on Tuesday as the dollar firmed on U.S. housing data. South Africa’s rand and stocks lost At 1510 GMT, the rand weakened 1.03% to 18.3675 against the dollar. The dollar index, which measures the U.S. currency against six major rivals, rose 0.156% to 102.64. The rand lost over 7% against the greenback in May, but it has managed to recover those losses in June on the back of less intense power cuts by state utility Eskom. The central bank’s leading indicator for April dropped 1.0% month-on-month, falling for the fourth consecutive month this year, data showed on Tuesday. The indicator collects data on vehicle sales, business confidence, money supply and other factors to gauge the outlook for Africa’s most industrialised economy. ALSO READ: Rand Report: Rand bounces back as economic sentiment improves On the stock market, the Top-40 and the broader all-share indexes dropped around 1.6%. South Africa’s benchmark 2030 government bond was weaker, the yield up 4.5 basis points to 10.825%. The South African rand has recovered against the dollar since May U.S. Dollar Reuters: The dollar was firmer on Wednesday leading in to Federal Reserve Chair Jerome Powell’s appearance at Congress where he is expected to strike a hawkish tone, while sterling lingered below recent peaks ahead of key inflation data. British inflation data is due at 0600 GMT, Bank of Japan Governor Kazuo Ueda is due to speak at 0630 GMT and Powell is due to begin his testimony before Congress at 1400 GMT. Sterling fell overnight but recovered about half its losses to trade steady at $1.2763 through the Asia session, not far below last week’s 14-month high of $1.2849. Economists expect inflation to show signs of easing and the data is likely to be decisive for the Bank of England. It meets on Thursday with markets currently pricing about a 75% chance of a 25 basis point hike and a 25% chance of a 50 basis point hike. “Sterling may halt the current reversal if expectations are reshaped, with the pair potentially jumping back above $1.28 and re-testing last week’s resistance at $1.2847,” said Daniela Hathorn, analyst at Capital.com. ALSO READ; Who is the richest person in the world today? Top 10 list – 21 June 2023 The euro was held to $1.0914 in Asia trade, while the yen slipped slightly to 141.80 per dollar as Bank of Japan minutes and officials stuck to a dovish stance and as traders turned their focus to the Fed. “Despite having paused last week, the Fed officials, still surprisingly aggressively forecasted another 50 basis points in hikes by end 2023,” said currency analysts at Maybank. “It is crucial to see whether Powell would more strongly drive home the point that the Fed is serious about another 50 bps of hikes or give the impression that they are ‘data dependent’,” they said. “The former may do more to give additional support to send the dollar index and yields higher.” Elsewhere there was little appetite for a bounce from either the yuan or the Australian dollar, which have been battered by China’s stalled economic recovery and lack of major stimulus. China set its yuan midpoint weaker than expected on Wednesday and the currency slid to a new seven-month trough of 7.1987 in onshore trade, while the offshore yuan weakened past 7.2 to the dollar. The Aussie had taken a further beating thanks to Tuesday’s less-hawkish-than-expected central bank minutes following this month’s rate hike. It fell 0.9% overnight and last bought $0.6786. “The path of least resistance is further declines,” said Commonwealth Bank of Australia strategist Joe Capurso. “The Aussie could dip below 0.6700 this week, particularly if Powell is hawkish,” he said. Powell is due to begin his testimony at 1400 GMT. The New Zealand dollar was dragged lower in sympathy, breaking below its 50-day moving average before steadying just above its 200-day moving average at $0.6178. The U.S. dollar index was marginally firmer at 102.60. Bitcoin extended overnight gains to breach$29,000 for the first time since late May, helped by the launch of a new crypto exchange backed by Fidelity, Citadel Securities and Charles Schwab. ALSO READ: UN accuses Russia of blocking aid to victims of dam breach British Pound Reuters: The pound traded lower against the dollar and the euro on Tuesday, as money market traders awaited pivotal inflation data due on Wednesday, ahead of the Bank of England’s monetary policy meeting this week. At 9000 GMT, the pound was $1.277, down 0.14% against the dollar, while the euro rose 0.2% to 85.59 pence. On Wednesday, official data for inflation in May will be published. Last month, Britain reported consumer prices eased to 8.7% in annual terms in April, down from 10.1% in March, with food and non-alcoholic drink price inflation in double digits at 19.1% in April from 19.2% the month before. The latest industry data from market researcher Kantar on Tuesday showed grocery inflation in Britain eased slightly for the third month in a row in June, but was still well into double digits. The outcome of the latest inflation figures could be a huge factor for the BoE’s Monetary Policy Committee on Thursday. The market sees a 73% chance that the BoE will hike interest rates by 25 basis-points and a 27% chance of 50 bps to 5%, up from the previous day. Two-year government bond yields remained above 5% on Tuesday, after slightly moving above Monday’s 5.085% peak for the first time since the 2008 financial crisis. Adding to the expectation, 64 economists in a Reuters poll last week said they saw the BoE adding another 25 bps to the interest rate, with a majority forecasting the bank rate to peak at 5.00% by the end of August. “Hedge funds and asset managers are positioned for the pound to outperform the dollar, but we think these positions could be vulnerable, as too much positivity may be priced into the pound,” Macrohive analyst Bilal Hafeez said in a note. ALSO READ: UN takes landmark step with adoption of ‘historic’ seas treaty Across the Channel, euro zone policymakers grappled with how the European Central Bank should continue to tackle inflation. Last week, ECB President Christine Lagarde said it was likely the bank would raise interest rates again in July. While some are dovish, the ECB’s hawkish policymakers have said inflation could prove to be higher than expected. Board member Isabel Schnabel said the ECB needed to “err on the side of doing too much rather than too little,” just days after the central bank raised rates to highest level in 22 years. Nonetheless, UK 10-year gilt yields traded at a premium of 197 bps over German 10-year Bunds, just shy of October’s 31-year highs – indicating how much more yield investors are demanding to hold British debt rather than euro zone benchmark bonds. Global Markets Reuters: Asian stocks struggled on Wednesday as a lack of new stimulus steps from Beijing frustrated investors, who were also wondering just how hawkish the world’s most powerful central banker would be later in the session. Federal Reserve Chair Jerome Powell faces lawmakers in two days of testimony and is sure to be questioned on whether rates will really rise again in July and peak in a 5.5%-5.75% range as projected. Markets have their doubts and currently imply around a 78% chance of a hike to 5.25-5.5% next month, with that likely being the end of the entire tightening cycle. “The focus is on whether the July meeting is truly “live” and if the Fed dot plot of two more hikes is a true base case depending on the data, or doom-mongering on inflation in an effort to ensure no premature easing in financial conditions,” said Tapas Strickland, head of market economics at NAB. ALSO READ: FAQ: SARS tax season – What must I do if I owe SARS money? The uncertainty kept S&P 500 futures and Nasdaq futures flat after a slight dip overnight. EUROSTOXX 50 futures edged up 0.2% and FTSE futures 0.1%. MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.8%, with South Korea off 0.6%. Japan’s Nikkei added 0.7% as the market consolidates three months of hefty gains. A survey showed morale at big Japanese manufacturers firmed in June to stay in positive territory for a second straight month. Chinese blue chips eased 0.6% with investors still disappointed by the extent of Tuesday’s rate cuts, which also saw the yuan hit its lowest for the year. Elsewhere in currencies, the battered Japanese yen won some respite as risk aversion prompted profit-taking on very crowded short positions. The currency has been falling for weeks as the Bank of Japan doggedly defended its super easy policies. Minutes of the central bank’s last meeting showed just one of nine board members suggested reconsidering its policy of keeping bond yields low, and even then suggested it was best to wait a while. That lack of urgency should limit any bounce in the yen and kept the dollar underpinned at 141.80 yen , only just off Tuesday’s seven-month high of 142.26. The euro, likewise, steadied at 154.78 yen , not far from its recent peak of 155.37. The single currency was flat on the dollar at $1.0916 , as was sterling at $1.2765. ALSO READ: Newspaper front pages from around the world, 21 June 2023 The pound faces a major test from data on UK consumer prices later in the day, where any upside surprise would add to pressure for the Bank of England to hike by an outsized 50 basis points at its policy meeting on Thursday. Median forecasts are for headline inflation to ease to 8.4%, but core to hold at 6.8%. “We look for the BoE to hike 25bps on Thursday, but given that recent data have surprised to the upside, we see a good case for a 50bp hike,” wrote analysts at JPMorgan in a note. “We will be closely watching the CPI report for a signal on the BoE’s path to a terminal rate.” Futures currently imply around a 25% chance of a half-point hike. Rising interest rates and higher bond yields have been a burden for gold which was pinned at $1,936 an ounce, just above last week’s three-month low of $1,924.99. Oil prices edged higher after a couple of sessions of losses, still struggling with concerns about Chinese demand absent a sizable stimulus package. Brent added 40 cents to $76.30 a barrel, while U.S. crude rose 44 cents to $71.63. ALSO READ: Fuel price LATEST: Two weeks to new petrol and diesel prices for July 2023 Published by the Mercury T eam on 21 June 2023 For more news on global and local market performance, follow our business and finance page .
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