Afternoon Note
20 September 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
ZAR drifting stronger to R18.9300/$ in afternoon trading as traders continue to play the range.
Today’s Market & Resistance Levels
Data This Week
Monday
Nothing of significance
Tuesday
11H00 EU INFLATION 5.3% EXPECTED YOY
14H30 US BUILDING PERMITS 1.44MM
Wednesday
08H00 UK INFLATION 7.1% CPI YOY EXPECTED
10H00 SA INFLATION 4.9% EXPECTED VS 4.7 PREVIOUS
13H00 SA RETAIL SALES -0.5% MOM EXPECTED VS +0.2% PREVIOUS
20H00 US FED FOMC RATE DECISION – UNCHANGED EXPECTED
20H30 US FED PRESS CONFERENCE
Thursday
15H00 SA SARB MPC UNCHANGED REPO AT 8.25%
16H00 ECB LAGARDE SPEAKS.
Friday
01H30 JP INFLATION AT 13H30
05H00 JP BOJ DECISION
Market Highlights
The ZAR drifting stronger with no real conviction but supported by higher than expected SA CORE YOY CPI at 4.8% and nominal CPI a 4.8%.
Stats SA reporting a minor uptick in local inflation.
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- SA’s annual inflation rate was at 4.8% in August 2023, matching market estimates, after four consecutive months of decline.
- However, it remains within the SARB’s target range of 3% to 6%.
- Prices accelerated mostly for housing & utilities (5.5% vs 5.1% in July), on account of electricity and other fuels (15.1%).
- The annual core inflation, which excludes prices of food, non-alcoholic beverages, fuel and energy, also edged higher to 4.8% in August, and slightly above market forecasts of 4.7%.
source: Statistics South Africa.
Earlier this morning UK inflation reported below 7%, allowing a sharp drop in the Pound and allowing for broad-based Dollar gains.
Inflation Data:
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- The FED: widely expected to keep the target range unchanged at 22-year highs of 5.25%-5.5%.
- Following a 25bps hike in July, in an attempt to better assess the impact of high borrowing costs on inflation.
- Still, the FOMC will likely leave the door open for another increase as early as November.
Inflation remains a concern and traders will also closely monitor new economic projections, particularly as rising oil prices threaten to push inflation higher once again.
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- The US economy has proven surprisingly resilient, due to robust consumer spending and a tight labour market.
The focus will however be the Fed decision (20h00 CAT) and Press conference at 20h30.
Expect increased volatility around this period, where language about future policy decision likely to set the next directional leg for the Dollar.
Trade: Buy USDZAR on dips, add through R19.10/$
Market Close
DOW
-106 to 34,517
SP500
-9 to 4,443
NASDAQ
-37 to 15,198
Overnight Trading
Image: Trading Economics
South Africa
DA vs ANC
The ANC adopted a report that scuppered a bill that intended to end cadre deployment with the support of the PAC in the National Assembly on Tuesday.
DA MP Leon Schreiber introduced the bill in 2021, and on Tuesday said it would be the “cure” for cadre deployment.
The bill was supported by the EFF, IFP, FF Plus, ACDP, AIC and Al Jamah-ah, but with its majority the ANC had the votes to put an end to it.
Only the ANC and the PAC’s sole member voted in support of a committee report that deemed a bill by the DA that intended to end cadre deployment “undesirable”.
The bill aims to depoliticise the public service.
The committee’s report recommended that the National Assembly not support the bill.
Source: EWN
SA BONDS
SA bonds extended its slump to longest since pandemic.
Yields on rand debt due in 2035 have climbed to 12.12% in the longest selloff for the bonds since the nine days ended June 17, 2020.
SA bonds are headed for an eighth consecutive day of declines, a losing streak last seen at the height of the Covid pandemic.
Concerns that the mid-term budget in early November will reveal a wider-than-expected deficit are weighing on sentiment.
Analysts concerned about missed tax-collection targets, state-owned company bailouts and relentless power cuts that have hobbled economic growth.
Any additional government bond sales in the local market to close funding gaps would come at a time of already high issuance.
Yields on rand debt due in 2035 have climbed to 12.12% in the longest selloff for the bonds since the nine days ended June 17, 2020.
Source Bloomberg
Global Markets
Stocks
US stock futures steadied on Wednesday as investors braced for the Federal Reserve’s monetary policy decision.
The central bank is widely expected to keep interest rates unchanged.
Markets will zero in on its economic projections and Fed Chair Jerome Powell’s remarks after the meeting for clues on its future policy plans.
In regular trading on Tuesday, the Dow fell 0.31%, the S&P 500 lost 0.22% and the Nasdaq dropped 0.23%.
Source: Trading Economics
Bonds
The yield on the US 10-year Treasury moved to 4.33%, closing in on the highest level in 16 years.
The Federal Reserve is expected to keep the target range for the federal funds rate at a 22-year high of 5.25%-5.5% today.
Still, the central bank will likely leave the door open for another increase as early as November.
Traders will also closely monitor new economic projections, particularly as rising oil prices threaten to push inflation higher once again.
The US economy has proven surprisingly resilient, due to robust consumer spending and a tight labour market.
Although inflation remains above the 2% target, it is much lower than it was a year ago.
The annual PCE rate, the Fed’s preferred inflation gauge, edged up to 3.3% in July from 3% in June – it compares with 6.4% in July 2022.
Source: CNBC
Overnight Headlines
Asian Markets
Stocks lower after ahead of Fed rate concerns.
In Japan, the Nikkei 225 Index fell 0.66% closing at 33,024, extending losses from the previous session and tracking Wall Street lower.
Investors geared up for the US Federal Reserve’s interest rate decision.
The Bank of Japan will also announce its monetary policy decision on Friday, where investors will focus on clues about a possible end to ultra-loose monetary settings.
Meanwhile, data showed that Japan’s trade deficit narrowed sharply in August, while imports and exports recorded a smaller fall than expected.
Source: Reuters
Energy
Oil lower.
Brent crude futures fell below $94 per barrel on Wednesday, sliding for the second straight session as caution dominated sentiment ahead of the US Federal Reserve’s interest rate decision.
Still, the international oil benchmark remained close to over ten-month highs.
Industry data showed that US crude inventories fell by 5.25 million barrels last week, marking the fifth consecutive decline and exceeding forecasts for a 2.667 million barrel draw.
Moreover, Russia’s government is reportedly considering imposing export duties on all types of oil products at $250 per metric ton from October 1st until June 2024 to counter fuel shortages.
Source: Gulf News
Metals
Precious metals are higher.
Gold was subdued around $1,930/oz as investors avoided making big bets ahead of the US Federal Reserve’s monetary policy decision, with higher energy prices raising concerns about inflationary risks.
The US central bank is widely expected to hold interest rates steady, but markets will focus on its economic projections and Fed Chair Jerome Powell’s remarks after the meeting for clues on the path moving forward.
Investors also await the Bank of England’s interest rate decision on Thursday, where it is expected to deliver its last rate hike in the current tightening cycle.
Source: KITCO
Currencies
The Dollar is steady ahead of the FED.
The dollar index steadied above 105 on Wednesday after facing pressure in the past two sessions.
Investors prepared for the Federal Reserve’s monetary policy decision.
The US central bank is widely expected to keep interest rates unchanged.
Markets will zero in on its economic projections and Fed Chair Jerome Powell’s remarks after the meeting for clues on the path moving forward.
Investors also await the Bank of England’s interest rate decision on Thursday, where it is expected to deliver its last rate hike in the current tightening cycle.
Moreover, the Bank of Japan will announce its policy decision on Friday amid speculations of a possible sooner-than-expected exit from ultra-easy monetary settings.
Source: Forexlive