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Afternoon NOTE

15 August 2023

Good Afternoon

The ZAR weaker on the back of Chinese property woes.  

Data this week


  • 03h30 : RBA  minutes
  • 08h00 : UK unemployment  expected 4% unchanged.
  • 11h00 : German Economic sentiment ZEW-14.4 expected vs -14.7
  • 11h30 : SA Unemployment RATE 32.8% VS  32.9% PREVIOUS
  • 14H30 : US  RETAIL SALES  0.4% MOM VS 0.2% PREVIOUS
  • 17H00 : FED KASHKARI Speaks.


  • 08h00 : UK  CPI inflation 6.8% vs 7.9% previous
  • 13H00 : SA RETAIL SLAES -0.5% VS -1.4%


  • 14h30 : US initial jobless claims 240k EXPECTED Vs  248k


  • 08H00 : UK RETAIL SALES   MOM  -% VS 0.7% EXPECTED

Market Highlights:

The Rand continued its decline and traded as low at R19.30/$ in early trading.

  • The ZAR continuing its slide on the back of risk aversion following Chinese property market concerns.
    • Earlier this morning the PBoC cuts rates to aid a faltering market.
    • Traders betting against the 15 bps cut, indicating more turmoil to follow.
    • The result a weak rebound in stocks, but currencies did not follow suit and the dollar rally continued.
  • A spike in US yields allowing the Dollar to attract more (safe-haven) inflows.
    • The ZAR like other high yielding currencies and risk assets dropping sharply.
    • As we approach the US open, 10year yields spiking to 4.27%.
    • Treasury issuances as well as inflation remains the drivers.
    • Hot off the press we have a spike in US retail sales at 0.7% MOM vs 0.4% expected.
    • The news kicking off another bout of Dollar buying.
  • The Dollar sharply bid at the expense of the ZAR.
  • The ZAR will continue to underperform in this environment.
  • Trade : BUY USDZAR



  • South Africa’s second quarter unemployment rate fell to its lowest level since the first quarter of 2021.
    • The reading beating analysts’ expectations, as employers added jobs in sectors including construction and trade.
    • The official jobless rate fell to 32.6% in the three months through June from 32.9% in the prior quarter, Statistics South Africa said Tuesday in a report released in the capital, Pretoria. Economists in a Bloomberg survey had expected the jobless rate to nudge down to 32.8%.
    • Unemployment according to the expanded definition stood at 42.1%, which includes people who were available for work but not looking for a job, compared with 42.4% in the March quarter. Source STATSA


  • The Presidency has shot down Cape Town Mayor Geordin Hill-Lewis’s threat to declare an intergovernmental,
    • dispute if President Cyril Ramaphosa does not respond to a request to create a joint working committee on rail devolution by the end of August. 
  • On Monday, Hill-Lewis said the lack of a functional passenger rail system was severely felt in Cape Town during the recent taxi strike.
    • Tens of thousands of commuters were left stranded as taxis across the Western Cape stopped running for eight days.
    • Bus services were also severely curtailed for safety reasons as striking taxi drivers targeted operating bus drivers. Source News24



Equities lower due to Chinese property sector concerns.

  • US stock futures were lower on Tuesday, with contracts on the Dow Jones falling about 200 points while both the S&P 500 and the Nasdaq 100 lost 0.5%, amid a prevailing negative sentiment triggered by Chinese data.
  • A a reduction in one of the key rates by the People’s Bank of China, which further underscored signs of a weakening economic recovery.
  • Also, a rise in Treasury yields pressured tech stocks, with Apple and Amazon losing nearly 0.5% in premarket hours.
  • Shares of big banks were down about 1% after one Fitch analyst told CNBC that another downgrade of the banking industry would force the agency to re-evaluate ratings on each of the more than 70 U.S. banks it covers.
  • Traders now await retail sales data for the US which is likely to point to a resilient consumer spending.


Yields higher as Treasury auctions continue.

  • The yield on the US 10-year Treasury note extended gains to 4.23%.
  • It was the highest since October last year, as traders increasingly bet interest rates will need to stay higher for longer and as the US economy remains way much stronger than its peers.
  • Last week, headline and core inflation increased less than expected, but remained above the Fed’s target while producer prices increased more than anticipated, led by the services sector, in a sign price pressures still remain elevated.
  • Higher than expected US Retail sales data due today also pointing to a solid consumer spending.
  • Traders are currently assigning a nearly 89% chance the Fed will leave the fed funds rate steady in September but the odds for a quarter point hike in November have been on the rise and now stand at about 36%.
  • Meanwhile, FOMC minutes due on Wednesday could provide further clues on the Fed’s next steps.
  • Traders are also keeping a close eye on new debt sales from the Treasury.


Market Closes:

  • DOW +26 to 35,307
  • SP500 +25 to 4,489
  • NASDAQ higher at  13,788

  image: Trading economics

Asian markets

  • Asian equities mixed. 
  • In Japan equities higher. The Nikkei 225 Index rose 0.56% to close at 32,239, recouping some losses from the previous session.
    • Investors cheered data showing Japan’s economy grew more than expected in the second quarter.
    • The country’s economy expanded 1.5% quarter-on-quarter and 6% on an annualized basis, far exceeding expectations of 0.8% and 3.1%, respectively.
    • Japanese shares also tracked a recovery rally on Wall Street overnight which was led by technology and other growth stocks
  • In China, the Shanghai Composite fell 0.07% to close at 3,176 while the Shenzhen Component dropped 0.7% to 10,680 on Tuesday.
    • The index  sliding for the third straight session as after the People’s Bank of China lowered its one-year medium-term lending facility rate by 15 basis points to 2.5% on Tuesday, the second such reduction this year.
    • Chinese stocks have come under pressure since Friday on fresh troubles in the property sector.
    • Earlier data showed that new bank loans in China tumbled 89% in July compared to June.


Oil prices remain bid on more supply cut news.

  • US WTI crude futures steadied above $82 per barrel on Tuesday after losing 0.8% in the previous session.
  • China and demand concerns weighing on the market.
    • Latest data showed that retail sales, industrial production and fixed asset investment in China all came in below expectations, while the urban unemployment rate ticked higher, weighing on the demand outlook in the world’s top crude importer.
    • Meanwhile, China’s central bank lowered a key lending rate on Tuesday to support the economy, the second reduction this year.
  • Still, the US oil benchmark remains up more than 20% since late June as OPEC+ majors Saudi Arabia and Russia curtailed supply. Source Gulf news


Precious metals lower after Dollar continued.

  • Gold lower at $1904/oz and hovering near 5-week lows and facing pressure from a strong dollar and Treasury yields.
  • Stronger Retail sales backing up the hotter-than-expected US producer inflation report for July.
  • The data fuelling  bets that the Federal Reserve will keep interest rates higher for longer.
  • Investors also brace for US retail sales figures and minutes of the Fed’s last policy meeting this week that could guide the economic and interest rate outlook. Source : Kitco


  • Dollar higher as strong US data continues.
  • The dollar index held above 103 on Tuesday, hovering near its highest levels in more than five weeks as a stronger-than-expected US producer inflation report for July fuelled bets that the Federal Reserve will keep interest rates higher for longer.
  • Stronger than expected US retail sales also adding to the strong Dollar bid after yields nearly reached 4.30%.
  • The Fed will also release its latest policy meeting minutes on Wednesday to give an idea into future rate paths. Source : Forexlive  

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