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Morning NOTE

05 May 2023


The ZAR consolidated near around the 18.3000 level ahead of today’s US Jobs report.


The Rand benefitted from a weaker Dollar following the Fed’s 25 basis point hike, and what many perceive to be a dovish pivot.

  • Slowing down the local unit’s advance are the on-going banking crises, although traders believe the next move will be for a stronger ZAR.
  • On Thursday trading was halted in Pacific West Bank as the stock dropped 50%.
  • Regional bank stocks, continues to slide following news that the Los Angeles-based bank was exploring strategic options, including a potential sale.
  • On the local front, Eskom’s loadshedding continues to negatively affect the SA economy, but markets largely ignoring it,
  • With the FED and today’s key US jobs report the only game in town.
  • This morning we expecting some ZAR weakness, as traders likely to err on the side of caution and hedge before the NFP report.
    • The low expectancy sub 200, could easily have an upside surprise and another weaker leg for the ZAR.
  • The Dollar remains under pressure following the Fed’s dovish pivot.

    • DOLLAR 101.22 / EURUSD 1.1035
    • GOLD 2041
    • SP500 4075 **
    • US10YT 3.38%
  • The ECB hiked by 25 basis points and in turn following the Fed allowing for Euro gains to continue.

Data This week


Market Movement Today:

  • The Rand consolidated around the 18.3000 level ahead of today’s all important US Jobs report.
    • The local unit has endured a rough couple of weeks, trading inside a 50 cents range (18.00000-18.5000).
    • On Tuesday this unit drifted towards 18.5000 ahead of the much anticipated FOMC decision.
    • The subsequent dovish report, allowed for the unwinding of Dollar longs and the ZAR benefitted to reach 18.1600.
  • This morning we expecting some ZAR weakness, as traders likely to err on the side of caution and hedge before the NFP report.
    • The low expectancy sub 200, could easily have an upside surprise and another weaker leg for the ZAR.
  • Nervousness ahead of today NFP report allowed for some profit taking to reach 18.3000.
    • The market trading in a small overnight range as traders as traders unlikely to assume large directional bets ahead of today’s data.
  • The Fed’s dovish pivot should really be risk asset supportive, but the continuation of the regional banking crisis have resulted in a demand for treasuries (safe haven)
    • At the expense of Risk assets (stocks and EMFX).
    • The fall-out of the FED’s relentless rate hikes (500bps), taking the Federal borrowing rate to the highest since December 2007, continues to wreak havoc.
  • Rates have peaked and we expect the ZAR to strengthen as traders continue to unwind Dollar longs.
    • In addition, Gold prices continue to advance with the yellow metal setting news highs.
      • Traders citing lower yields as well as safe-haven buying.
  • This will be ZAR supportive and a benefit to the SA Gold mining industry reeling from Eskom’s power cuts.

Expected Ranges:

  • USDZAR : Expect a range 18.1800-18.3600
    • Importers : 18.2400-18.1800
    • Exporters : 18.3000-18.3600
  • EURZAR : Expect a range of 20.0500-20.2600
    • Importers : 20.1200-20.0500
    • Exporters : 20.1900-20.2600
  • GBPZAR : Expect a range of 22.7200-23.2300
    • Importers : 22.8900-22.7200
    • Exporters : 23.0600-23.2300


  • USDZAR : 18.2700
  • EURZAR : 20.1700
  • GBPZAR : 23.0200


The SA post office

  • Opposition parties have called for the privatisation of the South African Post Office (Sapo), saying that African National Congress (ANC) cadre deployment “destroyed” the entity.
  • Members of Parliament (MPs) were debating what measures to take following the Post Office’s provisional liquidation and the negative impact this would have on the payment of social grants.
  • But Communications Minister Mondli Gungubele said that saving the company was government’s priority. EWN

Food shortages?

  • On the back of electricity and water crises, Food concerns continue to be raised , by industry leaders.
  • South Africa’s rolling blackouts could lead to destabilising food shortages as food retailers battle crippling cost pressures – and government’s silence in response to calls for relief from the industry will make it complicit.
  • Gareth Ackerman, presenting his annual chair’s address at the release of Pick n Pay’s 2023 financial results, describes the load shedding issue as placing the “entire food industry under existential threat”. Moneyweb
  • Jan Oberholzer, Eskom’s first and last chief operating officer, will stay at the troubled power utility for a while longer following his retirement in April, specifically to help see it through SA’s load shedding crisis.
    • Oberholzer confirmed on Wednesday that he and Eskom had concluded a contract for his services.
      • “A specific focus area is to oversee projects dealing with the current electricity crisis,” he said.
      • Oberholzer, who was appointed as Eskom’s first COO in 2018, has a long, experienced history with Eskom,
        • having worked for the utility for around 30 years. His father worked for Eskom for 25 years.  News24


  • In regular trading on Thursday, the Dow tumbled 0.86%, the S&P 500 dropped 0.72% and the Nasdaq Composite fell 0.49%, with nine out of 11 S&P sectors ending lower led to the downside by financials.
    • US stock futures rose on Friday as investors digested a fresh batch of corporate earnings,
    • with Apple shares gaining more than 2% in extended trading after the iPhone maker beat expectations for the top and bottom lines.
  • Futures contracts tied to the three major indexes were all up at least 0.2%.
    • The major averages also declined for the fourth straight session and are on track for a sharp weekly drop as worries about banking system stress and a possible Fed-induced recession lingered.
    • The Federal Reserve raised interest rates by 25 basis points on Wednesday and signalled a possible pause in its tightening cycle,
      • though Fed Chair Jerome Powell pushed back against bets for rate cuts this year. Investors now look ahead to the April jobs data on Friday.


  • US 10 Year Note Bond Yield was 3.39 percent on Friday May 5, according to over-the-counter interbank yield quotes for this government bond maturity.
    • Post the Fed’s rate decision, yields have remained under pressure as the Banking crises continues to rock financial markets.
      • Regional banks (the cornerstone of America’s industrial economy) remains under pressure as stock prices collapse and depositors jump ship to larger banks.
      • Investors not waiting either and stocks continue to get hammered.
  • In South Africa,
    • The 10-year government bond yield was around 10.09%, its lowest in two weeks.
    • Local bonds tracking falling US Treasury yields, after the Fed raised interest rates by 25 basis points and hinted it may soon pause its long rate-hike path.
    • Domestically, the SARB will likely extend its hiking cycle with an at least 25 basis increase in May. 5, 2023.
      • The MPC citing  inflation remains stubborn and accelerated for the second month to 7.1% in March.
      • SA CPI has breached the 6% upper limit of its target for eleven straight months and is only seen firmly back at the midpoint from the second half of 2024. Reuters


  • Dow declined 286 to 33,127
  • SP500 lower by 29.53 to 4,061
  • Nasdaq lower 59 to 11,966

  image: Trading economics


The US Dollar

  • The  US dollar declined further to 101.2 on Friday and was on track to finish the week lower.
  • Traders increased bets that the FED could end its aggressive tightening cycle soon and even cut interest rates toward the end of the year.
  • Those speculations came on the heels of growing fears of a US recession and signs of stress at another US regional bank.
    • PacWest shares sank 50% on Thursday following news that the California-based lender has been weighing strategic options, including a possible sale.
    • On Wednesday, the Fed delivered a widely expected 25 basis point rate hike but removed language from its policy statement that it “anticipates” further rate increases would be needed.
    • However, Fed Chair Jerome Powell clarified that the committee is not currently advocating for rate cuts based on their inflation outlook.
    • Investors now look ahead to the April jobs report for more clues on the state of the economy and the likely direction of monetary policy. FX NEWS

Asian markets trading mixed ahead of today’s US NFP report.

  • The labour market continues to be a reference point for the FED, as it continues to fight inflation.
  • In Japan, the Nikkei 225 rose 0.12% to close at 29,158, with Japanese stocks struggling for direction amid weak cues from Wall Street overnight.
    • The benchmark reached multi-month highs in the previous day as the Bank of Japan’s dovish stance spurred a selloff in the yen.
    • Japanese stocks traded mixed on Tuesday, with gains from Tokyo Electron (1.5%), Advantest (3.5%), and Oriental Land (0.5%), while losses were seen from Mitsubishi UFJ (-0.8%), Fast Retailing (-0.4%), and Toyota Motor (-0.5%).
    • In corporate news, speculations about a management buyout of SoftBank Group were reignited after Arm confidentially filed for a US stock market listing.
    • Japanese markets will be closed from May 3-5 for various holidays.
    • BUT, Investors now look ahead to the April jobs report for more clues on the state of the economy and the likely direction of monetary policy. CNBC

Crude oil

  • US WTI crude futures traded lower to $69/bl, on track to lose about 10% this week, weighed down by persistent concerns that higher interest rates could slow the global economy and hurt energy demand.
    • Both the Federal Reserve and the European Central Bank raised their policy rates by 25 basis points this week, fuelling fears that tightening financial conditions will push major economies into a recession.
    • A surprise contraction in Chinese manufacturing activity amid weakening global demand also clouded the outlook for the world’s top crude importer.
    • On the supply side, Russian crude exports jumped above 4 million barrels a day last week despite the country’s pledge to reduce production.
      • This prompted speculations that Russia could be ramping up oil exports to maximize income for its beleaguered economy. Gulf energy news


  • Gold prices reached a record high of $2,070/oz before giving gains back to the $2,050 mark.
  • It was the highest in 14 months, amid renewed turmoil in the US financial sector and dovish bets for the Federal Reserve.
  • Shares from regional US lenders tanked after a handful of banks stated they are in talks with investors and partners, deepening concerns of instability in the industry and triggering a fresh flight to safety.
  • Repeated threats to the stability of US banks hoarded bets that the Federal Reserve will not be able to maintain borrowing costs at an elevated level for long,
    • pressuring the dollar and reducing the opportunity cost of holding non-interest-bearing assets such as bullion. Kitco metals

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