The ZAR consolidation around R19/$ continues ahead of the weekend.
Data this week
- 08H00 : UK RETAIL SALES MOM -% VS 0.7% EXPECTED
The Rand consolidating after recovering from the lows reached on Tuesday.
- The ZAR traded in a narrow range in early Joburg trading.
- Traders citing some profit taking and position squaring ahead of the weekend, and also lack of meaningful economic data releases.
- The theme however continues with risk assets sharply lower across the board following the spike in US treasury yields.
- Gold below $1890/oz and both global heavy weight stock markets; the Nasdaq and SP500 also off 2023 highs.
- Traders continue to fret around the Fed’s next rate path and every data point is closely watched.
- Recent data supporting a strong US economy, that remains resilient in face of Fed rate hikes and could possibly withstand more hikes.
- The US10YT at 4.20% at the time of writing continues to be US Dollar supportive.
- Currencies in general, remain at the mercy of the Dollar, after a hawkish FOMC minutes release prompted a sell-off in risk.
- Members citing inflation concerns remain and we are left open with the possibility of the FED hiking again.
- It appears directional price action only coming from the USA, with profit-taking in the LDN/JHB session.
- The concern remains for US interest rates and with elevated US yields we expected a stronger Dollar.
- The US10YT AT 4.30%, appears to want to target 4.5% before 5%
- Recent Jobs data also suggesting tightness in the US labour market remains and this will continue to drive the FED.
- Focus also shifting to the BRICS meeting hosted by SA and major policy changes that could affect sentiment.
- The ZAR will continue to underperform in this environment.
- Trade : BUY USDZAR on DIPS
BRICS – CHINA ( SA)
- Ahead of the BRICS meeting, China announced it will resume beef imports from the Republic of South Africa on Aug 17.
- This according to an announcement on Thursday from the country’s customs administration.
- The announcement said China Customs recognizes the Northern Cape, Eastern Cape, Western Cape
- and parts of Limpopo, Free State, Gauteng, Mpumalanga and North West provinces as foot-and-mouth free zones. Source Moneyweb
- SA GDP could grow 3% if not for power and logistics woes, this according to Standard bank CEO Sim Tshabalala.
- He noted that the lender’s operations are growing significantly faster in its rest of Africa regions than in its domestic market.
- The bank, which is South Africa’s largest by assets and has the largest African footprint among its peers in the country.
- SBK also saw profits soar by more than a third during the first half of 2023.
- Tshabalala added its Africa regions franchise performed well and contributed 44% to the larger group’s earnings.
- He said the African continent is likely to see economic growth of 3.5% this year and 4% in the near to medium term,
- arguing that the ‘rest of Africa’ markets will grow significantly faster than South Africa. Source Moneyweb
Stock slide continues on the back of rising rates and China property concerns.
- US stock futures edged lower on Friday to extend the third straight session of decline on Thursday.
- Traders citing renewed concerns that US monetary policy could remain restrictive for some time and fresh credit risks in China.
- Futures contracts tied to the three major indexes were all trading below breakeven.
- In regular trading on Thursday, the Dow fell 0.8%, the S&P 500 lost 0.8% and the Nasdaq tumbled 1.2%.
- US stocks remained under pressure from rising Treasury yields.
- Additionally, Evergrande filed for US bankruptcy as recent profit warnings from state developers and Country Garden’s bond payment failure triggered a surge in Chinese private credit costs.
Yields off recent highs.
- The yield on the 10-year Treasury slid to 4.22% on Friday, after rising to as high as 4.328% in the previous session.
- It was the highest since October 2022 and just a tad below its highest level since 2007.
- The fluctuation is due to investor concerns about the economic impact of high interest rates.
- The Federal Reserve’s meeting minutes from July highlighted that there are still risks of higher inflation, suggesting the possibility of more tightening of monetary policy.
- Despite recent data indicating a decrease in inflationary pressures
- a strong US economy and a robust job market are reasons supporting the continuation of high interest rates. Source : CNBC
- DOW -290 to 34,474
- SP500 -33 at 4,370
- NASDAQ -156 at 14,927
image: Trading economics
Asian equities lower.
- In Japan equities lower, the Nikkei 225 Index fell 0.55% to close at 31,451, with both benchmarks finishing the week sharply lower.
- Investors reacted to data showing Japan’s headline inflation rate came in above forecasts in July.
- Meanwhile, the core inflation print slowed as expected, but remained above the Bank of Japan’s 2% target.
- Japanese shares also tracked losses on Wall Street this week amid renewed concerns that the US Federal Reserve could keep interest rates higher for longer due to upside risks to inflation.
- In China, the Shanghai Composite fell 1% to close at 3,132, as investor sentiment took a hit after Chinese real estate giant Evergrande filed for protection from creditors in a US bankruptcy court.
- The benchmark indexes also declined for the second straight week as the absence of meaningful measures from Beijing to support China’s faltering economy disappointed markets.
- Meanwhile, Chinese Premier Li Qiang said on Wednesday the government would work to achieve its economic targets for this year.
- He called for expanding domestic demand and boosting consumption. Source : Reuters
Oil prices trading sideways.
- Brent crude futures steadied above $84/bl on Friday but were still set to finish the week lower.
- The China’s weakening economy and fears of further US interest rate hikes outweighed signs of tightening global supplies.
- The international oil benchmark is down about 3% so far this week, on track to snap seven straight weeks of gains.
- Weaker-than-expected economic data and a deepening property sector crisis in China added to concerns about the country’s faltering economy.
- Meanwhile, investors remain cautious amid signs of tightness in the market after OPEC+ majors Saudi Arabia and Russia curtailed supply. Source Gulf news.
Precious metals lower as Dollar continues to
- Gold held below $1,900/oz on Friday and was set to decline for the fourth straight week.
- Prices weighed down by a strong dollar and Treasury yields as minutes of the Federal Reserve’s July meeting suggested further interest rate hikes could be ahead due to upside risks to inflation.
- Latest data also, pointing to continued tightness in the labour market.
- Investors also monitored China’s real estate sector after top developer Evergrande filed for protection from creditors in a US bankruptcy court. Source : Kitco
- Dollar higher after FOMC on back of more risk aversion.
- The dollar index rallied to 103.55 on Friday but was still on track to advance for the fifth straight week.
- FOMC minutes showed that policymakers stressed that upside risks to inflation remain, leaving the door open to further policy tightening.
- Latest data also pointing to continued tightness in the labour market.
- The dollar is set to gain against most major currencies this week,
- It remains down against the sterling as key measures of price growth monitored by the Bank of England failed to ease in July. Source : Forexlive