Daily Brief Macro: EM by EM #43: Rand’s Reckoning? and more

• Just as the markets were speculating about which spring month would see the first Fed rate cut of the cycle, a surprisingly high CPI report from the BLS swiftly dispelled any lingering dovish sentiment that had survived the recent NFP announcement.
• We’ve analyzed both the CPI data (see here) and the current labor market in detail (see here), and although there are signs of cooling, it’s difficult to counter the recent adjustments in the OIS curve.
• This suggests that USD assets remain the focal point, and for the foreseeable future, EM macro strategies should lean towards spread/receiving rather than expecting an NVDA-like bull run in equities

• Companies are expecting the Federal Reserve to reduce rates to ease the burden on consumers and boost confidence in markets.
• Inflation is still a concern for many companies, particularly at the high end, but the Fed cannot act until there is substantial data showing a decrease in inflation.
• The lower income consumers are trading down and experiencing financial difficulties, with subprime delinquencies reaching levels similar to 2009, which is concerning for the market. 

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• The latest data release from WCI shows the first w/w drop in US freight rates in a couple of months.
• Meanwhile Europe continues its drop in freight rates for the 3rd consecutive week now.
• Looks like the carnage in freight rates is over with seasonal effects in shipping expected to kick in 1-2 months from now based on historic import patterns from Europe and the US.

• In 2022, UAE experienced a significant rise in its GDP growth, as Real GDP reached AED 1,610.11 billion, reflecting a 7.41% increase compared to the previous year.
• Progressing onwards, the IMF has forecasted average growth rates of 3.52% for 2023 and 3.88% for 2024.
• The IMF projections affirmed continuous fluctuations in the nominal figures of Public Debt.

• UK GDP disappointed as revisions meant December’s surprisingly modest decline was consistent with a much weaker Q4, falling by 0.3% q-o-q after Q3’s 0.1% contraction.
• Although GDP is technically in recession, that definition is too easy to meet for a stagnant economy. The macro regime is not breaking into a traditional recession.
• Surveys suggest that GDP is already rebounding without the dip loosening the labour market. In our view, excess demand and inflation remain inconsistent with rate cuts.

• During the period under consideration, i.e. December 28th , 2023 to January 26th, 2024, the USD/AED exchange rate fluctuated between 3.672 and 3.673. AED is pegged to the US Dollar at 3.67.
• The MA-10 line was moving above the MA-20 line for the whole period. Both MA 10 and MA-20 lines maintained a steady upward trend throughout the entire period.
• Based on Graph 2, the PPO (red line) was moving upwards at the beginning of the period under consideration but after January 15th the movement changed.