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Morning NOTE

1 September 2022


The ZAR weakened on the back of Global Negative Risk sentiment as the threat of the FED un-nerved investors.


  • The Rand weakened to 17.2100, as the local unit and other currencies fall at the feet of a rampant US Dollar.

    • The overnight spike in treasury yields with a US 10YT trading at 3.20% set the cat amongst the pigeons.
    • Investors exiting risk assets across the board with the benchmark SP500 losing 1% to close at 3,955.
      • The key driver for financial markets continues to be a super Hawkish Fed.
        • The yield on the 10-year above 3.1% for the first since June 29th, as interest rates are set to continue to rise.
        • Powell reiterated the need for restrictive monetary policy for some time to bring inflation down.
          • Money markets are now pricing a 70% chance the Fed will hike rates by 75 bps at its September meeting.
          • Meanwhile, the 2-year Treasury yield hit 3.48%, its highest level since November of 2007.
        • Traders remain nervous ahead of Friday’s NFP report.
    • On Wednesday, EU inflation surprised markets to the upside as the natural gas energy crises continues to wreak havoc in the Eurozone region.
      • CPI printed at 9.1% sightly above consensus as Russia once again shut of gas pipelines for “maintenance”.
    • After Germany and now the EU recording, multi- decade high inflation numbers, investors are starting to pay more attention to what was said at Jackson Hole.
    • Locally , the SA trade balance came in at +R24bn on the back of a strong export market performance.
    • NB: Weaker than expected US ADP jobs data not doing anything to support investor sentiment.

Significant Market Data


    • 12H30 : Fed president BOSTIC SPEECH
    • 14h30 : US WEEKLY JOBLESS CLAIMS +  248k expected



  • Once again expect a weaker ZAR as the market continues to track international developments.
    • Early on look for some rotation as market makers clear out order books and weak stops.
    • Weak longs who entered at the close of NY and Asia at risk of getting stop-loss orders triggered before a weaker ZAR trend resumes.
  • The aggressive spike in the US10YT and a market now convinced of a 75bps hike (70% priced in), indicates another strong session for the US Dollar.
    • It is highly unlikely that the ZAR will strengthen to any degree of significance in this environment .
    • Trade : BUY USDZAR.

Expected Ranges

  • USDZAR : Expect a range 16.9400-17.3500
    • Importers 17.1000-16.9400
    • Exporters 17.2500-17.3500
  • EURZAR : Expect a range of 17.0000-17.3500
    • Importers 17.1500-17.0000
    • Exporters 17.2500-17.3500
  • GBPZAR : Expect a range of 19.7300-20.0300
    • Importers 19.8000-19.7300
    • Exporters 19.9500-20.0300


  • USDZAR 17.1900
  • EURZAR 17.2200
  • GBPZAR 19.9100


  • Phala-Phala
    • CR insisting he did not evade questions and was purely acting on advice of his legal representatives.
      • Opposition parties were left outraged when President Cyril Ramaphosa once again cited legal processes for not providing them with specific details as to what transpired.
      • In addition, Justice Minister Ronald Lamola denied accusation that he interefered with the investigation.
      • He said officials did not know that the request was related to the incident on President Cyril Ramaphosa’s property.
  • Justice and Correctional Services Minister Ronald Lamola told Parliament that the Gupta brothers were indeed behind bars and had been denied bail.
    • He also said that their extradition from the United Arab Emirates had not been delayed and was well within the extradition treaty time frame.
    • Lamola was taking questions in the National Assembly on Wednesday as part of the peace and security cluster. EWN
  • Jacob Zuma was instructed to pay back nearly R8m on his Nkandala Bond, following the collapse of VBS BANK.
    • Zuma obtained the bond / loan a few months before VBS collapsed.
    • Jacob Zuma owes VBS Mutual Bank R6.5 million – he started defaulting on the loan soon after the bank was put under curatorship. News 24


  • Equity market fell sharply in New York on the back of a spike in US yields.
    • In regular trading on Wednesday, the Dow lost 0.88%, the S&P 500 shed 0.78% and the tech-heavy Nasdaq Composite was down 0.56% for their fourth straight session of losses.
  • US stock futures fell further on Thursday after the major averages closed out August with losses.
    • Traders nervous about the Federal Reserve’s aggressive plan to bring down inflation that sparked fears of slowing economic growth.
    • Dow futures fell 0.3%, S&P 500 futures dropped 0.5% and Nasdaq 100 futures declined 1%.
  • In addition, Nvidia’s stock cratered on Wednesday, after announcing it’s been told by the U.S. government to stop selling chips in China and Russia.
    • The stock falling 6.5% in extended trading. CNBC
    • The company said it was applying for a license to continue some Chinese exports but doesn’t know whether the U.S. government will grant an exemption.


  • The 10-year yield rose above 3.1% for the first since June 29th, as interest rates are set to continue to rise.
    • Fixed income markets are now pricing a 70% chance the Fed will hike rates by 75 bps at its September meeting.
    • In addition, the yield curve inversion continues with the 2-year Treasury yield hit 3.48%, its highest level since November of 2007.
  • Earlier in the session Cleveland’s ‘ influential Fed governor, Loretta Mester said, she sees the Fed funds rate rising above 4% in early 2023.
    • This was needed to break the back of inflation.
    • She added, the rate increases, likely to slow economic growth, which she sees as running “well below 2%.”
    • She also added she DOES NOT SEE RATE CUTS IN 2023.


  • The Dow fell 280 to 31,510
  • The SP500 fell 31 to 3,955
  • The Nasdaq  declined 66 to 11,816

Futures Trading:

  • image : Trading economics


  • Asian markets lower across the region as the risk off theme continued. The fall in NEW YORK , feeding through into ASIA as the investors exit risk assets.
  • In Japan, the Nikkei 225 fell 1.53% to close at 27,661. The index falling to its lowest levels in almost a month.
    • Traders citing a hawkish outlook on US interest rates and weak global economic data hampering investor sentiment.
    • Investors are also monitoring the Yen which has fallen to a fresh 24-year low on a widening policy gap with the US, sliding toward the key 140.
    • Analysts said the move could prompt Japanese authorities to intervene in the currency markets.  Reuters
  • In Australia, the ASX 200 declined 2.02% to close at 6,846, as tightening monetary conditions and weak data across major economies escalated fears of a global economic slowdown.
    • Weak manufacturing PMI data from China and other major economies also exacerbated a softening global demand outlook.
    • This in turn pressuring Australia’s export-reliant, commodity-heavy industries.
    • Heavyweight iron ore miners led the declines, with sharp losses from BHP Group (-7.6%) and Fortescue Metals (-4.2%).  Reuters
  • Crude oil traded below $90/bl as the US WTI benchmark contract fell sharply on Wednesday.
    • The final day of August trading confirming a third consecutive monthly decline, as recession worries and a weakening demand outlook overshadowed concerns about tighter supply.
    • Oil has fallen more than 20% in the past three months as major central banks aggressively raised interest rates to combat surging inflation.
    • China demand concerns also hitting the market on the back of global recessionary fears.
    • The sharp declines in oil prices also prompted Saudi Arabia to signal that OPEC+ could cut supply.
    • This would effectively neutralise the extra crude expected from a supply boost, should Iran it clinch a nuclear deal with the West. Gulf Energy News
  • Gold hammered on the back of a rampant Dollar and rising interest rates.
    • Bullion prices lower and fast approaching key support at $1,700/oz.
    • Comments from Cleveland Fed President Loretta Mester, that the policy rate will have to be moved “somewhat above 4%” by early next year sucked the life out of Gold bulls resulting in heavy selling.  
    • She added for good measure, she does not anticipate rate cuts in 2023.
    • Eurozone inflation rate also hit a new record high of 9.1% in August on high energy prices, bolstering speculations for a supersized 75 basis point rate hike from the ECB next week despite recession worries.
    • NB: higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal. Kitco metals
  • The US Dollar rallied above 109 and once again reached its highest level in 20 years.
    • The buck supported by Cleveland Fed President Loretta Mester, that she does not anticipate rate cuts in 2023.
    • Markets are currently priced for a third straight 75 basis point rate hike in September, as investors look ahead to the monthly jobs report on Friday to gauge the strength of the labour market.  Fx news

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