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Morning NOTE

 10 February 2023


SONA and the FED, dominating recent ZAR price action, as markets continue to worry about higher US interest rates.


  • The Rand lost ground to trade above 17.8000 after reaching an intraday high of 17.5900.
    • After trading higher for most of the session; stocks in New York reversed as investors once again fretted about a continuation of aggressive Fed polices.
  • The SP500, at one stage firmly in black, reversing sharply to post a session decline of nearly 1%.
    • The price action providing support to the US dollar at the expense of Risk assets and the EMFX complex.
    • Gold also losing ground and falling to $`1855/oz , below the $1900/oz mark
      • , indicating that Dollar gains were broad based after the US 10YT yields rose  to 3.66%.
    • Risk assets, remain on the defensive on the back of FED speakers who continue to push for higher interest rates.


  • On Tuesday next week, the USA once again reports INFLATION DATA.
  • US CPI FOR January expected to drift lower to 6.3% vs 6.5% previous and
  • US  Core  CPI  also expected to decline to 5.4% from 5.7% earlier (YOY data).
  • The data will either support or reject the FED’s rhetoric, especially after Jerome Powell, stated that the Disinflationary process had begun.
  • Markets appearing to embrace the “fear trade” ahead of the data next week.
  • Yesterday’s US Weekly jobless claims, also reported worse than expected.
    • The data once again highlighting that the Friday NFP report should not be viewed in isolation.
      • filing for first time unemployment rising to 196,000 for the week.
  • On the data front SA’s mining data showed significant improvement with both general mining as well as Gold production reporting higher than excepted.
    • However, load shedding continues to hamper SA manufacturing as the sector continues to show a decline.
  • SONA : Ramaphosa announced declared a state of disaster , leaving opposition parties to object and wanting to know more details of the project.
  • He also pledged to raise the social grant amount of people that analysts view as a negative for the SA fiscus and the Balance sheet of SA inc.

Data this week 


  • 09H00 : UK  GDP 0.4% EXPECTED YOY VS 1.9% PREVIOUS

Market Movement Today:

  • The ZAR weakened after Fed officials once again spooked the markets with rate hike talks as well as nerves around the SA SONA.
  • The local unit losing more than 20 cents after reaching an intraday high of 17.5900.
  • This morning we opening at the top end of the weekly range.
    • In the absence of more hawkish rhetoric, we could likely find “Dollar Longs”, book profits, allowing for the unit to retrace back into the weekly range.
  • Technical resistance:
    • The market has tested above 17.8000 on 3 occasions with Dollar Sellers appearing at this level.
    • The 17.8000 level coincides with the 61.8% Fib retracement level, calculated from the move the move from 18.5000 to 16.7000.
    • The ZAR pre-NPF traded at 17.1200 and currently hit 17.8200 (a loss of 4% for the week)
  • We have no new data of significance and the probability of a move back to the middle of the range (17.5500) remains quite high.
  • TRADE: SELL USDZAR on rallies
    • NB:  Around and above, 17.8000 to 18.0000 remains great value levels especially for exporters.
    • Who are able to take advantage of both the ZAR Forward curve and Options skew.

Expected Ranges:

  • USDZAR :  Expect a range 17.5800-17.9400
    • Importers 17.7000-17.5800
    • Exporters 17.8200-17.8800
  • EURZAR :  Expect a range of 18.8400-19.2300
    • Importers 18.9700-18.8400
    • Exporters 19.1000-19.2300
  • GBPZAR :  Expect a range of 21.3200-21.6800
    • Importers 21.4400-21.3200
    • Exporters 21.5600-21.6800


  • USDZAR 17.7100
  • EURZAR 19.0100
  • GBPZAR 21.4100



  • President Cyril Ramaphosa declared a national state of disaster during his SONA speech in parliament.
  • The president said it would allow government to provide practical measures to minimise the impact of load shedding on businesses,
    •  individuals and public infrastructure, analysts said more detail was needed.
    • “The Minister of Cooperative Governance and Traditional Affairs has just gazetted the declaration of the State of Disaster, which will begin with immediate effect,”
    • The DA , the country’s largest opposition party rejected the declaration of a state of disaster.
    • DA whip stating, that the last time there was a state of disaster to deal with the COVID-19 pandemic,
  • We saw essentially a looting frenzy because procurement processes were allowed to be subverted”.  EWN


  • The EFF were removed from a joint sitting of Parliament and the National Council of Provinces, after disrupting attempts by the president to deliver the SONA
    • The red berets attempted to prevent the president from delivering his speech with Speaker Nosiviwe Mapisa-Nqakula calling on security to intervene.
    • EFF members attempted to step onto the platform on their way out.  EWN


  • Department of Tourism Minister Lindiwe Sisulu, when asked, at SONA,  if the deal was a mistake, she emphatically said, “absolutely not”.
    • She continued that tourism drives the economy, as is the case in many other countries and marketing is needed. News24


  • With more than 25 million people dependent on some form of income support in South Africa, existing social grants will be increased.
  • Rampahosa stating it would be elaborated on by Minister of Finance Enoch Godongwana later in the year.
  • President Cyril Ramaphosa said, due to the rising cost of living, that the Social Relief of Distress (SRD) Grant would continue to be distributed. IOL


  • On Thursday, the Dow fell 0.73%, the S&P 500 lost 0.88% and the Nasdaq dropped 1.02%.
    • In additional analysts reporting that all 11 S&P sectors ended lower.
    •  Investors now await more Fed commentary, economic data and corporate earnings on Friday.
  • US stock futures steady in early Friday trading, after Thursday saw the 2nd day of declines.
    • Traders citing as the prospect of further rate hikes from the Fed  in its fight against inflation weighed on sentiment.
    •  Futures contracts tied to the three major indexes drifted flat to slightly positive.


  • The US 10-year yield traded lower  and moved back below 3.6% as investors reassessed the Federal Reserve’s plans for rate hikes.
    • A string of Fed policymakers reiterated that interest rates would need to keep rising to bring down inflation to its 2% target.
  • BUT, Richmond Federal Reserve president Thomas Barkin was among the latest officials to acknowledge that the US economy is slowing allowing the central bank to move more deliberately.
    • Investors now see the Fed raising the fed funds rate to 5%-5.25%, with the world’s most influential central bank delivering a 25 bps hike in March and May before pausing.
  • Looking ahead, we await next week’s US INFLATION on Tuesday, that  will once again drive price action.


  • The Dow declined 249 to 33,699
  • The SP00 fell 46 to 4,081
  • The Nasdaq fell 120.94 to 11,789

:  image: Trading economics


The US dollar

  • The dollar index remained firmly above 103 investors look ahead to US inflation data next week.
    • The data likely to provide for clues about the trajectory of Federal Reserve interest rate hikes.
    • Investors also embraced hawkish signals from Fed officials this week,
      •  who reaffirmed their commitment to bring inflation down with further policy tightening.
  • But, investors remained cautious about escalating risks of a recession and signs of cooling inflation.
    • The US. Fed Chair Jerome Powell said earlier this week that the disinflationary process has started, but
      • warned of more rate increases if the jobs market remains strong.

Asian Markets mixed with Japan rallying on a weaker Yen and the rest of the region trading lower.

  • In Japan the Nikkei 225 rose 0.6% to 27,760, defying weak global sentiment as strong domestic corporate earnings and robust outlooks supported the Japanese market.
    • Japan’s companies that all benefit from exports, all well bid after the Yen resumed its declined against the dollar.
    • Companies that rallied on upbeat earnings reports and the Nikkei Index is on track to advance for the fifth straight week.
  • In China, the Shanghai index declined, giving back some gains from the previous session.
    • Markets all weighed down by weak global sentiment as investors fretted about the prospect of further policy tightening.
    • Investors also digested data showing China’s inflation rate hit a three-month high of 2.1% in January, but below market expectations of 2.2%.
    • Consumer and new energy stocks led the market lower.  Reuters
  • US WTI Crude oil traded near $78/bl on Friday and were set to gain about 6% this week.
    • SUPPLY
      • Prices supported by various supply disruptions as well as additional sanctions on Russian oil and optimism over a rebound in Chinese demand.
      • Earlier this week, a crucial oil terminal in Turkey suspended operations due to the recent earthquake, while a major oil field in Norway unexpectedly shut down.
      • The European ban on seaborne imports and price caps for Russian oil products also came into effect on Sunday.
    • DEMAND
      • China’s economy could be poised for a stronger-than-anticipated rebound that will boost demand for crude.
      • But , slowing the advance were a hawkish Fed , that could drive the US into  a recession and scupper demand . Gulf energy News


  • Gold declined to trade below $1,860/oz and was set to decline for the second straight week.
    • Bullion remaining under pressure due to hawkish signals from Fed officials  who reiterated their commitment to bring down inflation with more rate increases.
    • Officials remaining determined in their approach to get inflation down to 2%
    • Investors now look ahead to more Fed commentary and US consumer sentiment data on Friday, as well as next week’s US inflation data.
    • All likely to provide clues about the trajectory of Fed policy tightening.

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