The ZAR continued its astonishing turn around with the local unit trading below R19.00/$ (briefly) before rebounding.
The Rand gained another 1.7% before stabilising around the R19/$ level.
- The local unit gaining more than 30 cents after opening at the 19.3000 level.
- Traders citing, the unwinding of stale Dollar longs and aggressive exporter selling that resulted in more stops being triggered.
- In addition, talks between Ramaphosa and Putin about the ramifications and risk of an arrest , as well as sanctions on SA if the country fails to act on the ICC order.
- All of this prompted speculation that the summit could be moved to China.
- And This adding to the uber bullish ZAR session.
- This morning however, we back in the hands of international capital markets and US yields spiking sharply higher,
- After two major G7 central banks surprised the markets with a rate hike.
- US Treasury yields surging in early trading with the 10YT above the 3.80%.
- Markets repricing the time and we now expected a 25 bps hike by the FED next week.
- Both the RBA and BOC surprising markets with rate hikes as the governors of Australia and Canada both cited that monetary policy remains accommodative.
- Echoing the IMF president earlier in the week, who called for more action to bring global inflation back down the 2% level.
- Inflation remains well above and in most G7 nations more than double the preferred 2% level.
- The Dollar finding support on the back of the yield spike .
Locally, this morning, the SARB publishes Q1 current-account data at 11am.
- Economists surveyed by Bloomberg forecast the current account deficit widened to 2.8% of gross domestic product in the three months through March from 2.6% in the prior three-month period.
Markets this morning
- USDZAR 19.0800
- DOLLAR 104.10
- EURUSD 1.0707
- SP500 4,261
- GOLD 1943
- US10YT 3.81
Data This week
- 11H00 : SA CURRENT ACCOUNT
- 13H00 : MANUFACTURING PRODUCTION YOY 2.5% EXPECTED VS -1.1% PREVIOUS
- 14H30 : US INITIAL JOBLESS CLAIMS 238K VS 232K EXPECTED
Market Movement Today:
- The Rand remains on the front foot and gained another 30 cents on Wednesday.
- The local unit briefly trading below the 19 handle.
- A combination of Exporter selling , stop-losses being triggered on stale longs as well as the possible movement of the BRICS summit,
- All adding to ZAR optimism,
- Markets ignored SA data and today will turn its attention to the recent Trade balance numbers released by the SARB at 11h00.
- Traders also trying to digest the news that Ramaphosa remains eager to partner with SA business to “FIX” SA.
- Eskom loadshedding also “unexpectedly “ stopping as schedules not adhered to.
- Globally, US yields spiking at the open.
- The US 10YT once again above 3.80% after the Bank of Canada and Reserve bank of Australia both raised rates unexpectedly.
- A follow up on the IMF theme that global interest rates remain far too accommodative and that current levels are too low to bring down inflation.
- The Dollar finding support as markets once again pricing in a rate hike at next weeks FOMC meeting.
- The buck once again above 104 on the basket index level.
- Given the sharp retracement in the ZAR, and rebound in Dollar yields we think importers have an opportunity to exact cover at
- Incredibly favourable rates vs the high of last week’s R19.9000/$
- The story however remains the Dollar and US interest rates and the FED next week and we expect volatility to continue.
Markets this morning
- USDZAR 19.0800
- DOLLAR 104.10
- EURUSD 1.0707
- SP500 4,261
- GOLD 1943
- US10YT 3.81
- Trade : BUY DIPS ON USDZAR
- USDZAR : Expect a range 18.9100-19.2100
- Importers : 19.0100-18.9100
- Exporters :,19.110019.2100
- EURZAR : Expect a range of 20.2900-20.5600
- Importers : 20.3800-20.2900
- Exporters : 20.4700-20.5600
- GBPZAR : Expect a range of 23.5600-23.9200
- Importers : 23.6800-23.5600
- Exporters : 23.8000-23.9200
- USDZAR : 19.0800
- EURZAR : 20.4000
- GBPZAR : 23.7200
National Treasury V Eskom
- Finance Minister, Godongwana rejects Eskom’s financial reporting exemption application
- Saying the state-owned power utility needs to do more operationally to reduce the scope of fraud and corruption before such an exemption can be considered.
- Godongwana has rejected Eskom’s application for a partial exemption from the Public Finance Management Act (PFMA) and National Treasury regulations.
- If it was approved, it would have allowed it not to disclose irregular, fruitless and wasteful expenditure and material losses from criminal conduct in its annual financial statements.
- Godongwana said on Wednesday he recognises the commitment of the Eskom board and management to fight and expose fraud and corruption,
- and the additional compliance and reporting burden facing Eskom and other state-owned enterprises (SOEs). EWN
- Media rights groups have hailed Wednesday’s ruling on former president Jacob Zuma’s private prosecution of journalist Karyn Maughan as “an overwhelming win for media freedom”.
- The Pietermaritzburg High Court on Wednesday upheld an application from Maughan to review and set aside the summons Zuma served .
- The former president issued a summons on her last September in which he accused her of breaching the National Prosecuting Authority (NPA) Act.
- This in connection with what he’s maintained was the leaking of confidential medical information by the NPA to Maughan. News24
Rampahosa approaches SA business
- The SA government and organised business groups have agreed to work together to find an urgent solution to overcome hurdles preventing economic growth and job creation.
- President Cyril Ramaphosa chaired a meeting with the country’s business fraternity to discuss remedial measures needed to solve issues in various sectors.
- During the meeting, issues pertaining to energy, transport, crime and corruption were identified as key areas in need of urgent intervention.
- In the past month, the rand hit a new low to the US Dollar, while the ever-increasing repo rate continued to put financial pressure on ordinary South Africans. Money web
On Wednesday, the Dow rose 0.27%, while the S&P 500 and Nasdaq Composite tumbled 0.38% and 1.29%, respectively.
- 6 S&P sectors advanced including energy, real estate, utilities, industrials, materials and financials,
- while the communication services, technology and consumer discretionary sectors were the worst performers.
- With a lack of market-moving catalysts, investors are looking ahead to the Federal Reserve’s policy meeting next week as well as US inflation data.
- US stock futures were little changed on Thursday after the major averages ended mixed during Wednesday’s regular session, as investors rotated out of technology and other growth stocks into other sectors.
- Futures contracts tied to the three major indexes drifted flat to slightly negative
- In extended trading, GameStop sank nearly 20% after the video game retailer fired its CEO Matthew Furlong and appointed Ryan Cohen as executive chairman. CNBC
- The yield on the US 10-year Treasury note rose past the 3.75% level.
- The benchmark yield reaching the “ over-two-month-high” of 3.8% touched on May 26th.
- Investors once again concerned that that inflation is stickier than expected strengthened expectations that the FED will deliver another rate hike.
- Both the RBA(Australia) and the BoC (Canada) delivered surprise rate hikes this week.
- The G7 central banks citing risks that borrowing costs are not sufficiently tight to bring inflation rates back to target levels, which mirror similar concerns about the US.
- Markets once again flip flopping and now price a 70% likelihood that the US central bank will deliver at least one 25bps rate hike by its July meeting.
- Investors now await the key inflation print due next week,
- a hot reading set to solidify another Fed hike after the latest payrolls report showed that the US added a remarkable 339K jobs in May.
- DOW added 91 to 33,665
- SP500 declined 16 to 4,267
- NASDAQ fell 172 to 13,104
image: Trading economics
The US dollar
- The US dollar finding support and once again above 104 on Wednesday.
- The surprise hikes by both the RBA and BoC, adding to hawkish nervousness ahea of inflation data and the Fed decision next week.
- Markets are once again pricing for a rate hike in June.
- The rally in the Dollar not as fast as investors unwind long bets on the dollar, which were taken as a hedge before the U.S. government raised the debt ceiling.
- The market is monitoring the U.S. Treasury’s increased issuance of Treasury bills to rebuild its cash balance, as any potential demand problems could impact the market.
- The latest data showed the U.S. trade deficit widened in April, driven by increased imports and decreased exports.
- Elsewhere, recent rate hikes by the Bank of Canada and the Reserve Bank of Australia increased nerves with the Fed expected to hike next week. Fx News
- In Japan, the Nikkei 225 Index rose 0.3% to around 32,000, recouping some losses from the previous session as investors cheered an upward revision in Japanese GDP data.
- Japan’s annualized GDP for the first quarter was revised to 2.7%, higher than the consensus forecast of 1.9% and a preliminary reading of 1.6%.
- Commodity-linked stocks led the advance.
- Elsewhere, Eisai jumped 9.4% after the US FDA the trial of its Alzheimer’s disease drug suggests it offered a meaningful benefit to patients.
- and safety concerns likely would not hamper its chances of a traditional approval. Reuters
- In Australia, the ASX 200 Index fluctuated around 7,118 on Thursday after falling for two straight sessions.
- The gains in mining and energy stocks were offset by losses in technology and healthcare names.
- Investors also continued to assess the outlook after data showed that Australia’s economy grew 0.2% in the first quarter,
- the slowest rate of expansion in six quarters and missing forecasts for a 0.3% growth as household consumption weakened.
- Mining and energy stocks advanced on firmer commodity prices, with gains from BHP Group (1.2%), Rio Tinto (1.2%).
- But, technology and healthcare stocks tracked their US peers lower. Bloomberg
- US WTI crude futures flat lined above $72 /bl after facing heightened volatility earlier in the week.
- Traders weighed the prospect of tighter supplies against concerns about weakening global demand.
- Saudi Arabia, the world’s largest oil exporter, announced over the weekend its intention to reduce output by 1 million barrels per day to 9 million bpd in July.
- It was the lowest level in years amid an effort to bolster crude prices.
- The latest EIA report also showed that US crude inventories declined by 451,000 barrels last week,
- defying expectations for a 1.022 million barrel increase and in line with industry data reported Tuesday.
- Meanwhile, recent concerns about China’s slowing economy and potential recessions in the US and Europe have put pressure on oil markets.
- Investors also fretted about the prospect of further interest rate hikes from major central banks that could negatively impact overall demand. Gulf Energy news
- Gold was lower this morning after the spike in US yields.
- Prices opening around the $1944/oz level.
- Investors geared up for the US Federal Reserve’s interest rate decision next week.
- Markets now pricing for a 25bps hike at next weeks key FOMC meeting.
- Still, the metal remains down more than 5% from its May peak.
- This as major central banks are anticipated to keep interest rates higher for an extended period due to persistent inflationary pressures. Kitco metals