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Midday NOTE

11 August 2023

Good Afternoon

The ZAR consolidated its hard earned gains around the R18.85/$ level, following a benign US CPI report.

Market Highlights:

The Rand held on to gains to trade in a narrow range around the R18.85/$ level.

  • The local unit benefitting form a lower than expected US CPI report.  
    • Yesterday’s CPI report surprising markets to the downside and effectively lending support to a “dovish FED “.
      • US yields dropping to reach 4.00% and placing the Dollar under pressure.
      • The Buck however rebounding after Fed governors called for higher rates to remain.
      • Risk assets selling off sharply after the those comments and treasury yields also rebounding due to large issuances.
    • The elephant in the room remains the large treasury issuances.
      • Hence, Yields will remain well supported during this process and this in turn will help the Dollar.
      • It effectively acts as a contraction in money supply or  quantitative tightening (QT).


  • However, given the slowdown in prices pressures in various sectors of the economy  i.e.  Services, manufacturing & jobs,
    •  we expect rates to drift lower and this will be Dollar negative and ZAR supportive.



  • Former President Jacob Zuma will not be returning to prison.
    • Correctional Services Minister Ronald Lamola outlined this decision to members of the media in Hatfield, Pretoria on Friday morning.
    • In July, the Constitutional Court upheld the ruling that Arthur Fraser’s 2021 decision to grant Zuma medical parole just two months into his 15-month contempt sentence was unlawful.
      • Ultimately, though, he’s now been granted a remission of his sentence.
    • The Department of Correctional Services said that he was one of thousands of inmates who’d been granted such a remission in a bid to alleviate overcrowding in prisons. Source EWN


  • Western Cape Premier Alan Winde said that he was relieved that the minibus taxi strike has ended.
    • Winde has called on all parties to commit themselves to the minibus taxi task team and resolve all matters there.
    • He said that Western Cape citizens and commuters should always come first and should never be left on the side of the roads again.
    • The five people who lost their lives.
    • Taxis are back on the road again on Friday after a week-long strike marred by violence and intimidation. Source EWN



Equities are flat ahead of New York open.

  • US stock futures traded modestly higher on Friday after Wall Street eked out slight gains overnight.
  • Investors assessed whether the latest US inflation data could spell the end of Federal Reserve interest rate hikes.
  • US CPI  rose by 3.2% yoy in July, marginally below market forecasts, and the core gauge posted its smallest back-to-back increase in two years.
  • Meantime, San Francisco Fed President Mary Daly said there’s “more work to do,” despite a slowdown in inflation.


Yields continue to drip lower following US regional bank concerns.

  • The yield on the US 10-year eased to the 4% mark, extending its retreat from the nine-month high of 4.19% on August 3rd.
    • A cooler-than-expected CPI report backed market expectations that the Fed will refrain from hiking interest rates this year, raising demand for bonds in the secondary market.
    • Consumer prices in the US rose by 3.2% annually, below expectations of a 3.3% rise, while the core gauge was also lower than expected at a 4.7% increase year-on-year.
    • Additionally, initial unemployment claims rose beyond expectations to a one-month high, defying the previous trend of labour-market tightness.
    • Consequently, financial markets price a 75% certainty that the Fed will hold its terminal rate at 5.5%.
    • It goes  against the latest Summary of Economic Projections that reflected a median terminal rate of 5.75%. Source CNBC


Market Closes:

  • DOW +52 to 35,176
  • SP500 +112 to 4,468
  • NASDAQ +15  to 13,737

  image: Trading economics

Asian markets

  • Asian markets

    Asian equities lower.  

    • In Australia, the ASX 200 dropped 12.80 points or 0.17% to close at 7,344.60 on Friday.
      • The index  snapping three-day gains, as investors were cautious after Mary Daly said that inflation in the US was still too high and the central bank should do more work.
      • Meantime, the  outgoing RBA chief,  Philip Lowe suggested that monetary policy may need to be tightened further as CPI remains elevated at 6% mainly due to a further rise in cost of service      Source :  Reuters
    • In Japan markets will be closed Friday for a holiday.
  • Energy

    Oil prices higher on more supply cut news.

    • US WTI crude futures rose to $83/bl, holding close to a nine-month high of nearly $85 as investors assess the global economy, interest rates, and IEA and OPEC outlooks.
      • The IEA signaled potential declines in worldwide oil stockpiles throughout 2023, potentially pushing prices even higher.
      • OPEC indicated an expectation for global oil demand to grow by 2.25 million bpd in 2024, slightly less than the projected 2.44 million bpd increase for the current year.
      • Furthermore, Saudi Arabia and Russia output cuts, as well as Russia-Ukraine tensions have been supporting prices.
      • In addition, US July consumer prices sparked speculation of a potential slowdown in interest rate hikes by the Federal Reserve.
      • However, China’s mixed economic data raise uncertainty about its future oil demand. Source Gulf new
  • Metals

    Precious metals lower ahead of key US CPI report.

    • Gold prices were below the $1,920/oz, remaining near the one-month low from the prior session and tracking higher  Treasury yields.
      • Markets remained sceptical over the Fed’s course of action following the latest economic releases.
      • July’s US CPI numbers were cooler than expected, backing the current trend of disinflation in the US economy.
      • Traders also solidifying bets that the Federal Reserve will refrain from raising its funds rate in its upcoming September meeting.  Source: Kitco
  • Currencies

    Dollar steady after.

    • The US dollar was steady on Friday, with the index hovering around 102.5, as traders digested US headline inflation reading for July that showed a moderate increase.
      • Fed governors however stating it remains above the Federal Reserve’s 2% target.
      • The annual inflation rate in the US rose to 3.2% last month from 3% in June, below forecasts of 3.3%; while core inflation edged down to 4.7% from 4.8%, also less than expectations of 4.8%.
    • Still, the index was on course to gain for the fourth straight week.
      • The buck supported by overall strong US economic data and renewed worries about the health of the country’s banking sector and stalling economic recovery across the mainland.
    • Meantime, geopolitical concerns re-emerged after Washington banned certain US technology investments in China.  Source :  Fx news

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