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Midday NOTE

10 August 2023

Good Afternoon

The ZAR rebounded in early Thursday trading, with traders booking gains ahead of this afternoon’s US CPI report.

Data This week



Market Highlights:

The Rand recovered in early morning trading following a sell-off that reached R19.08/$ on Thursday.

  • The local unit recovering to R18.80/$ ahead of this afternoon’s key US CPI report.
    • Joburg traders citing a combination of profit-taking and position squaring, as  the reason for the ZAR’s strength.
    • In addition, Risk assets rebounding with European stock markets trading higher ahead of the data release.
    • The US 10YT yields also moving lower with the 10YT at 4%.
    • All of these factors helping the ZAR to rebound more than 20cents today.
  • But, the US CPI continues to attract the most attention and concern and it remains a flip of a coin as to future directional bias.
  • After the recent Risk-off environment following the Banking downgrades in the USA , the CPI remains the most important data point today.
  • A miss either way (HIGHER =  BUY USD and LOWER = SELL USD), will set the tone for FX direction.
  • Markets are priced for a higher print and this will be Dollar supportive.
  • Trade : BUY USDZAR on dips.


Renewable energy Eskom’s best shot at ending power cuts – energy council of SA.

  • SA Energy Council CEO, James Mackay, said that the private sector was ready to work with government to advance the transition to renewable energy.
  • As the country continues to battle rolling power cuts, the Energy Council of South Africa believes the transition to renewable energy is Eskom’s best shot at ending load shedding.
  • The Gauteng government has gathered energy experts at the provincial energy indaba at the Gallagher Convention Centre in Midrand on Thursday.
  • This is to discuss and find solutions to assist municipalities to respond efficiently to the energy crisis. Source EWN


  • Iran asked SA’s government to support its “accelerated membership” of BRICS.
  • The five-nation bloc prepares to hold a summit later this month.
  • “We hope to obtain the opportunity of accelerated membership under strong support we hope to receive from South Africa,”
    • This according to Iranian Foreign Minister Hossein Amirabdollahian said at a briefing in the capital, Pretoria, on Thursday.
    • BRICS are scheduled for August 22-24 to discuss issues including the expansion of the group. Source Moneyweb



Equities recovering after closing lower after Banking downgrades rattle markets.

  • US stock futures rose on Thursday as investors prepared for a key inflation reading that could influence the Federal Reserve’s next policy decision.
    • Futures contracts tied to the three major indexes were all up at least 0.2%.
    • In regular trading on Wednesday, the Dow fell 0.54%, the S&P 500 dropped 0.7% and the Nasdaq declined 1.17%.
    • Traders citing 7 out of the 11 S&P sectors ending lower led to the downside by technology, communication services and consumer discretionary.
    • Investors now look ahead for the US CPI reports later on Thursday for more insight on how the Fed’s tightening campaign has impacted prices.


Yields continue to drip lower following US regional bank concerns.

  • The yield on the US 10-year Treasury note steadied around 4.01%, the lowest level so far in August.
    • Traders await the US CPI report for further insights into the potential inflationary pressures on the economy and the outlook for monetary policy.
    • There is an 86% likelihood of the Federal Reserve maintaining the fed funds rate next month while market participants see a nearly 29% chance of a 25bps hike in November.
    • Meanwhile, a $38 billion of 10-year notes resulted in a higher yield of 3.999%, compared to 3.857% in July .
    • Also, a $42 billion sale of 3-year notes on Tuesday resulted in a lower yield compared to July, indicative of robust demand for Treasury securities.
    • The upcoming sale of $23 billion of 30-year bonds will also be keenly watched,
      • especially after the Treasury Department announced last week its intent to expand the size of its quarterly bond sales. Source CNBC


Market Closes:

  • DOW -191 to 35,123
  • SP500 -31 to 4,467
  • NASDAQ -162 to 13,722

  image: Trading economics

Asian markets

  • Asian equities higher.  
  • In Japan the Nikkei 225 Index rose 0.84% to close at 32,474, reversing losses from earlier in the session.
    • Investors prepared for a key US inflation report that could influence the Federal Reserve’s interest rate decision in September.
    • Domestically, investors digested data showing producer prices in Japan rose the least in over two years and slowed for the seventh consecutive month in July.
  • In Australia, the ASX 200 Index gained 0.26% to close at 7,357 on Thursday, rising for the third straight session, with energy stocks leading the advance amid stronger oil prices.
    • Investors also digested data showing Australian inflation expectations declined to a four-month low of 4.9% in August as price pressures abate further.
    • Meanwhile, traders remained cautious ahead of a key US inflation print that could influence the Federal Reserve’s interest rate decision in September. Source :  Reuters

Oil prices higher on more supply cut news.

  • US WTI crude futures remained above $84/bl, hovering close to a nine-month high reached in the previous session.
    • Energy commodity markets continued to worry about production cuts from key OPEC+ members Saudi Arabia and Russia.
    • Saudi Arabia reaffirmed on Tuesday its commitment to rein in production and balance market pressures.
    • This  after announcing last week that it would extend its 1 million barrels per day production cut into September and possibly beyond.
    • Russia also said last week that it will reduce its oil exports by 300,000 bpd next month. Source Gulf news

Precious metals lower ahead of key US CPI report.

  • Gold held below $1,930 /oz, facing constant pressure as investors prepare for key US inflation data this week that could influence the trajectory of interest rates.
  • The US consumer price index report will be released on Thursday, while the producer price index report is slated the following day.
  • The metal has come under pressure since mid-July amid signs of economic resilience in the US and bets that the Federal Reserve will keep monetary policy restrictive for some time.
  • Richmond Fed President Thomas Barkin said on Tuesday that the central bank has time to study data before deciding if further rate increases are needed.
  • Meanwhile, data on Wednesday showed that China’s consumer inflation declined for the first time in over two years in July.  Source: Kitco

Dollar lower on profit taking ahead of CPI

  • The dollar index retreated to 102.2 on Thursday as traders turned cautious ahead of a key US inflation reading that could influence the Federal Reserve policy decision in September.
  • Investors expect the inflation rate to accelerate to 3.3% from 3% in June, which would mark the first increase in headline inflation since June 2022, mainly reflecting base year effects from energy costs.
  • The core rate is seen steady at 4.8%, remaining well above the Federal Reserve’s 2 percent target.
  • Moreover, the Biden administration banned new US investment and expertise that supports Chinese development of sensitive technologies, fanning geopolitical concerns.
  • The EUR, the GBP the AUD and the NZD all rose while the yen eased and hit a one-month low at 144.14 per dollar.  Source :  Fx news

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