Afternoon Note
25 August 2023
Support & Resistance Levels
Data This Week
Market Highlights
Market Close
South Africa
Global Markets
Overnight Headlines
Support & Resistance Levels
ZAR volatility continued with the unit recovering nearly 20 cents in early JHB trading.
Today’s Market Support and Resistance Levels:
Data This Week
Tuesday
Wednesday
Thursday
Friday
16H05 JACKSON HOLE – JEROME POWELL SPEECH
Saturday
JACKSON HOLE SYMPOSIUM
Market Highlights
Rand volatility continued with the unit reaching R18.8500/$ last night before recovering sharply to R18.6500/$ in morning trading.
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- Traders flip-flopping between BRICS and Jackson hole with no consensus reached.
- All of this adding to wild swings in the Rand.
This afternoon’s Jackson hole speech by Powell likely to be the clincher and we expect more directional certainty after Powell.
- The Dollar will react sharply either way , and we anticipate a hawkish tone to send yields higher and Dollar stronger across the board.
- Likewise, any hint of a pause or dovish tone will send the Dollar lower and be ZAR positive, possibly targeting R18.4500/$ before R18.000/$.
- The US10yt yield also rebounding to 4.25% and the Dollar index above 104 indicating a market nervous for higher rates.
Market volatility enhanced as traders continue to trade on every data point ahead of Jackson hole (16h05 today)
Market Close
DOW
-373 to 34.099
SP500
-60 to 4.376
NASDAQ
-2 at 14.834
Overnight Trading
image: Trading economics
South Africa
BRICS CURRENCY
BRICS currency was never on table, SA finance chief says.
Suggestions that the BRICS group of emerging market powers establish their own currency to reduce their reliance on the dollar aren’t under serious consideration and never have been, South Africa’s finance minister said.
“No one has tabled the issue of a BRICS currency, not even in informal meetings,” Enoch Godongwana said in an interview on the sidelines of the bloc’s annual summit in Johannesburg on Thursday.
“Setting up a common currency presupposes setting up a central bank, and that presupposes losing independence on monetary policies, and I don’t think any country is ready for that.”
Source: Moneyweb.
BRICS EXPANSION
President Cyril Ramaphosa was hailed for his “political mastery” after guiding his BRICS counterparts on who should be allowed in an expanded version of the bloc.
Speaking virtually on Thursday, Russian President Vladimir Putin mentioned Ramaphosa’s sleek politics in his efforts to bring partners together to reach consensus.
“I would like to thank our SA friends for their efforts during our joint work. I would like to point that President Ramaphosa showed unique political mastery as we negotiated all the issues – even the BRICS expansion,” he said.
Putin said the matter of a common BRICS currency would be discussed further, but emphasised that member states resolved to work on trading in local currencies.
Source: News24.
Global Markets
US stock futures were little changed on Friday.
Investors braced for Federal Reserve Chair Jerome Powell’s address at the central bank’s annual symposium in Jackson Hole, Wyoming.
Futures contracts tied to the three major indexes were all trading near breakeven.
In regular trading on Thursday, the major averages initially rallied on the back of Nvidia’s strong quarterly results, before reversing lower.
Investors booked profits and turned cautious ahead of Powell’s remarks.
The Dow fell 1.08%, the S&P 500 dropped 1.35% and the Nasdaq Composite tumbled 1.87%.
Investors will also assess US consumer sentiment data for August, while there are no major companies reporting earnings on Friday.
The yield on the 10-year US Treasury note retreated toward 4.2% after hitting a 15-year high of 4.342% on August 21st.
The result a sharp rebound for government bonds worldwide as credit markets continued to assess the policy outlook for the Federal Reserve.
Cooler-than-expected PMI figures engaged bond buyers in the market to take further advantage of the recent slump in Treasury securities.
It was reflecting bets that fears of a slowing US economy will force the Fed to ease its hawkishness.
Still, other data releases countered slowdown fears, and a relatively tight labour market suggested the US central bank may still have more room to tighten monetary policy.
Additionally, risks remain for bond prices in the secondary market due to concerns about higher long-dated debt issuance from the Treasury this month.
Source: CNBC
Overnight Headlines
Asian Markets
Asian equities sharply lower.
In Japan , the Nikkei 225 Index dropped 2.05% to close at 31,624, snapping a four-day advance and tracking losses on Wall Street overnight.
Investors turned cautious ahead of Federal Reserve Chair Jerome Powell’s Jackson Hole speech.
Strong quarterly numbers from Nvidia which initially pushed the market higher also failed to sustain the recent run-up in stocks.
Meanwhile, investors digested data showing the core inflation rate in Japan’s capital city of Tokyo slowed to 2.8% in August from 3% in July.
Inflation also remained above the Bank of Japan’s 2% target for the 15th consecutive month.
Technology stocks led the selloff, with sharp losses from Tokyo Electron (-5.9%) and SoftBank Group (-3.1%).
Energy
Oil prices higher.
Brent crude futures steadied above $83/bl on Friday but were still set to decline for the second straight week, weighed down by a weakening demand outlook and a strong dollar.
Major economies including the US, Euro zone and Britain reported softer-than-expected PMI data earlier this week, clouding the global demand outlook.
The dollar also continued to strengthen leading up to Federal Reserve Chair Jerome Powell’s Jackson Hole speech, making oil more expensive for holders of other currencies.
On the supply side, Iran’s oil minister said the country’s oil output will reach 3.4 million barrels per day by the end of September despite US sanctions.
US authorities are reportedly considering a proposal to ease sanctions on Venezuela’s oil sector.
Source: Gulf News
Metals
Precious metals subdued.
Gold was subdued below $1,920/oz , facing pressure from a strong dollar as investors prepared for Federal Reserve Chair Jerome Powell’s Jackson Hole speech for clues on the path for US monetary policy.
Analysts are expecting Powell to reiterate the central bank’s stance of keeping interest rates higher for longer to counter inflationary risks.
He will also be stressing that policy decisions will be highly dependent on incoming data.
Two Fed officials also indicated on Thursday that the jump in bond yields could complement the central bank’s effort to slow the economy and get inflation back to the 2% target.
Still, the metal is set to gain more than 1% this week, likely snapping a four-week decline as softer-than-expected business activity data in major economies supported bullion prices.
Source: Kitco
Currencies
Dollar higher.
The dollar index moved above 104 on Friday. The Buck hitting its highest levels in eleven weeks.
The World’s reserve currency on track to advance for the sixth straight week as investors braced for Federal Reserve Chair Jerome Powell’s Jackson Hole speech for clues on the path for US monetary policy.
Analysts are expecting Powell to reiterate the central bank’s stance of keeping interest rates higher for longer to counter inflationary risks.
The dollar strengthened across the board, with the most pronounced buying activity against the euro and sterling.
Source : Forexlive