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Morning NOTE

01 June 2023


The ZAR weakened sharply to trade above R19.9000$ and hit its weakest levels ahead of Friday’s NFP report.


The Rand remained on the back foot setting a new low above R19.9000/$ ahead of Friday’s US jobs report.

  • The local unit failing to register any meaningful gains after the US yields declined from recent peak levels on the back of a US Debt ceiling agreement.
  • The 10YT trading at 3.65% vs 3.80 % last week. Traders attributing the “slow down” in the Dollar’s advance on the back of falling yields.
  • ZAR selling remains at the open with the local unit setting a new low above R19.9000/$
    • The ZAR under additional pressure and currently facing a perfect storm;
      • Rising US rates
      • Eskom loadshedding
      • Sanctions threat.

Risk assets recovering on the back of some profit taking (from shorts liquidating their positions ahead of Friday’s NFP).

  • Gold bouncing $30 to trade at $1965/oz as well as the SP500 recovering from monthly lows.
  • Currently the Euro-Dollar interest futures continues to price for a 25bps rate hike in June by the FED.
    • This would like be US Dollar supportive (if supportive by a strong Jobs report).
      • Fed governors however continue to add volatility to market continues.
    • After Bullard , Williams and  Cleveland’s Fed President Loretta Mester ,  all called for more aggressive policy in terms of rate hikes,
      • last night we had a different tone ;
    • Fed Governor and vice chair nominee Philip Jefferson saying that;
      • “skipping a rate hike at a coming meeting would allow the Committee to see more data before making decisions about the extent of additional policy firming.”
        • He added that any decision to hold rates steady should not be viewed as the end of the tightening cycle. 
  • The comments once again creating uncertainty as to the FED’s next move.
  • However, rate markets continue to price for 25bps rate hikes.
  • Today, we have the SA trade data at 14h00 as well as ECB president Lagarde speaking at 14h30, that will likely have an effect on the market.

Markets this morning

  • USDZAR 19.7500
  • DOLLAR 104.32
  • EURUSD 1.0680
  • SP500 4,188
  • GOLD  1959
  • US10YT 3.67%

Data This week




Market Movement Today:

  • The Rand once again opening on the back foot as the local unit sets a new low above R19.900/$
    • The Dollar opening sharply higher in early trading as the Euro and Yen also fall victim to the Buck.
    • For now  traders prefer the Dollar in favour of all risk assets as we await tomorrows all important Risk event i.e. Non Farm payrolls.
    • Rate markets continue to price for 25 bps hike by the Fed , with more hawkish rhetoric to follow.
  • The Dollar index recovering from lows after the Debt ceiling bill looked certain to pass the House and move onto the Senate floor.
    • In addition, the threat of US sanctions due to SA’s continued courting of Russia as an ally looming large.
  • The ZAR under additional pressure and currently facing a perfect storm;
    • Rising US rates
    • Eskom loadshedding
    • Sanctions threat.

Johannesburg interbank traders all calling for a USDZAR above R20/$ as a serious possibility.

Trade Buy USDZAR as we approach the NFP


  • USDZAR 19.7500
  • DOLLAR 104.38
  • EURUSD 1.0684
  • SP500 4,192
  • GOLD  1961
  • US10YT 3.65%

Expected Ranges:

  • USDZAR : Expect a range 19.5800-19.8800
    • Importers : 19.6800-19.5800
    • Exporters : 19.7800-19.8800
  • EURZAR : Expect a range of 20.9700-21.1800
    • Importers : 21.0400-20.9700
    • Exporters : 21.1100-21.1800
  • GBPZAR : Expect a range of 24.3700-24.6700
    • Importers : 24.4700-24.3700
    • Exporters : 24.5700-24.6700


  • USDZAR : 19.7300
  • EURZAR : 21.0800
  • GBPZAR : 24.5400


  • President Cyril Ramaphosa is digging in his heels on South Africa’s non-aligned stance to conflicts around the world, including Russia’s invasion of Ukraine.
    • Delivering the budget vote of the Presidency in Parliament on Wednesday afternoon, Ramaphosa’s committed to travelling to both countries to encourage a peaceful solution to the war.
    • Ramaphosa has, meanwhile, slammed the United Nations (UN) for not giving Africa a permanent seat at the table of the security council.
    • Ramaphosa said that South Africa was pleased to join a delegation of six African nations to seek a peaceful resolution to the war in Ukraine. Moneyweb
  • The South African Revenue Service (SARS) has imposed penalties amounting to R381 million on 690 000 taxpayers for outstanding returns this year.
    • The tax authority confirmed that some 609 000 of these taxpayers had been penalised for having just one return outstanding. Since December 2022, penalties can be applied for a single outstanding return.
      • Previously penalties were only imposed on taxpayers with more than one tax return outstanding,
        • but an amendment to the Tax Administration Act – making it possible for SARS to penalise those with just one return outstanding – has resulted in many more taxpayers being penalised.
    • A SARS spokesperson confirmed that only 86 000 of the around 690 000 taxpayers penalised this year had received penalties for multiple outstanding returns. News24
  • The Gauteng High Court in Johannesburg has issued a writ order to auction off the ANC’s assets in connection with the R102.4 million debt owed by the party. 
    • A branding company, Ezulweni Investments, says the ANC owes it millions for a branding campaign linked to the party’s 2019 election campaign. 
    • ANC secretary-general Fikile Mbalula adds he has not seen the writ and when he does, the party will challenge it.
    • He said the ANC planned to open a criminal case. EWN



  • US stock futures steadied on Thursday after the major averages declined during Wednesday’s regular session.
    • Investors fretted about the prospect of further interest rate hikes from the Federal Reserve and cautiously awaited progress on the debt ceiling debate in Washington.
      • Futures contracts tied to the three major indexes drifted flat to slightly positive.
      • In extended trading, Nordstrom, Chewy and Pure Storage jumped on better-than-expected results.
    • In regular trading on Wednesday, the Dow fell 0.41%, the S&P 500 declined 0.61% and the Nasdaq Composite tumbled 0.63%.
      • For the month of May, the Nasdaq Composite gained 5.8% due to a rally in artificial intelligence-related stocks.
      • However, the Dow lost 3.5% and the S&P 500 inched up 0.25% last month as broader economic concerns weighed on the market.


  • The yield on the US 10-year Treasury note fell to under 3.7%, well below 3.85% touched last week, as investors await the votes on the debt deal.
    • The House of Representatives is expected to vote on the bill today after it was cleared in the House Rules Committee with a 7-6 majority.
      • If the bill passes the House, it will then go to the Senate. Still, several Republicans have stated that they will not vote in favour of it.
      • Yields on lower-maturity bonds which carry a higher risk of default, extended the decline from recent highs, with the 4-week bill falling to below 5.3%.
      • Meanwhile, markets have now assigned a higher probability for a 25bps rate hike in the fed funds rate in June.
      • Key economic data due this week including the payrolls report and the ISM Manufacturing PMI should provide further clarity on the economic strength.  Reuters


  • DOW -134 to 32,08
  • SP500 -25 to 4,179
  • NASDAQ -82 to 12,935

  image: Trading economics


The US dollar

  • The dollar index was subdued around 104.2 on Thursday after easing from over two-month highs in the previous session, as investors reassessed the outlook for Federal Reserve monetary policy.
    • Fed Governor and vice chair nominee Philip Jefferson said on Wednesday that “skipping a rate hike at a coming meeting would allow the Committee to see more data before making decisions about the extent of additional policy firming.”
      • He added that any decision to hold rates steady should not be viewed as the end of the tightening cycle.
  • Safe-haven demand for the dollar also eased after the US House of Representatives passed the bill to raise the debt ceiling with broad bipartisan support, advancing it to the Senate ahead of the June 5 deadline. FX news

Asian markets recovering on the back the US debt ceiling passing the house of congress.

In Japan, the Nikkei 225 jumped 0.8% to around 31,140, recouping losses from the previous session in a broad market rebound.

  • The Nikkei 225 surged 7.04% in May, reaching over three-decade highs and outperforming global peers driven by a rally in semiconductor and related stocks.
    • Investors also digested data showing Japanese manufacturing activity turned expansionary in May, while capital spending was up 11% in the first quarter.
    • Technology stocks led the rebound, with strong gains from SoftBank Group (5.6%).
  • In China, the Shanghai Composite rose 0.5% to around 3,220, recouping losses from the previous session, with high-growth technology stocks leading the advance.
    • Investors also cheered a private survey released Thursday showing Chinese manufacturing activity unexpectedly expanded in May, in contrast to official data on Wednesday which pointed to further deterioration in the manufacturing sector.
    • Tech firms lead the rally.  Reuters

Crude oil

  • WTI crude futures steadied above $68 per barrel on Thursday after losing more than 6% in the past two sessions, but remains under pressure as a surprise build in US crude inventories and signs of weaker Chinese demand weighed on the market.
    • Data from the American Petroleum Institute showed that US crude stockpiles jumped by 5.202 million barrels last week, defying expectations for a 1.22 million barrel decrease.
      • Official data released Wednesday also showed that Chinese manufacturing activity contracted at a faster pace in May, fuelling concerns about weaker demand in the world’s top crude importer.
    • However, a private survey released Thursday pointed to an unexpected growth in Chinese manufacturing activity in May.
    • Meanwhile, markets are bracing for the upcoming June 4 meeting of OPEC+, where investors remain split on whether the group would cut production further following mixed signals from key officials. Gulf energy news


  • Gold steadied above $1,960/oz on Thursday, holding its recent advance as traders reassessed the US Federal Reserve’s interest rate outlook.
    • The gold market posted its first monthly loss since February, wrapping May down about $36.
    • As markets eye the crucial Congress vote to lift the debt ceiling, some Federal Reserve speakers are pushing for a “hawkish pause” at the June 13-14 meeting.
    • For gold, a debt deal does not necessarily mean lower prices, Moya said in a note Wednesday.
      • “The details behind the proposed piece of legislation include significantly lower spending, which will be a major blow to the economic outlook and likely trigger a much harder-hitting recession,” he noted.
      • The more significant risk to the gold price is what the Fed decides to do in June and July, with market expectations shifting drastically in the last few weeks. Kitco metals report

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