The ZAR weakened sharply as global markets retreated ahead of today’s US inflation report.
The Rand lost 2.4% to 18.7200, after an aggressive sell-off session. Traders citing numerous concerns as a threat to risk assets,
- Today’s US CPI the standout candidate but also the fast approaching US debt ceiling and the impasse between the two rival parties in America on agreeing a resolution.
- Locally Eskom’s stage 6, now 2x 4 hour sessions also adding the local unit’s woes.
- Ahead of the European open Bank filling import stop loss orders and the lack of liquidity adding to a sharp blow off in the ZAR.
- The move however appears to be ZAR related, after the Euro, Pound and Yen rebounded vs the Dollar.
- According to Reuters, the ZAR losing ground primarily because of the US interest rate fears, with CPI looming large at 14h30 today.
- The CPI numbers are expected to set the tone for global markets,
- as investors will scrutinise them for clues about the Federal Reserve’s future monetary policy decisions.
- The Fed has been on a 15-month rate-hiking cycle but signalled a possible pause at its last policy meeting.
- Economists expect the headline CPI to hold steady at an annual 5% and core CPI to moderate very slightly to 5.5%, though anything stickier could confound bets interest rates will fall.
- Among local drivers, South Africa’s central bank governor Lesetja Kganyago will from 09h00 GMT deliver a lecture on the topic: “Challenges facing the global economy: A South African Perspective”.
However, today’s 14h30 US CPI the standout candidate for more volatility this session.
- USD 101.50 -0.1%
- SP500 4125 +0.20%
- EURUSD 1.0977 +0.14%
- US10YT 3.51%
Data This week
- 14h30 : US CPI (INFLATION) YOY 5% EXPECTED VS 5% EXPECTED
- 14h30 : US CORE CPI (INFLATION) YOY 5.5% EXPECTED VS 5.6% EXPECTED
- 14h30 : US CORE CPI (INFLATION) YOY 0.4% EXPECTED VS 0.4% EXPECTED
- 11h30 : SA MINING PRODUCTION -4.3% MOM VS -4.9% PREVIOUS
- 11h30 : SA MINING PRODUCTION -7.3% YOY VS -5% PREVIOUS
- 11h30 : SA MANUFACTURING PRODUCTION -0.9% MOM VS -1.3% PREVIOUS
- 11h30 : SA MANUFACTURING PRODUCTION -5.8% YOY VS -5.2% PREVIOUS
- 13H00 : UK BOE RATE DECISION 4.5% VS 4.25% PREVIOUS (+25 BPS)
- 14H30 : US PPI 2.5% EXPECTED VS 2.7% PREVIOUS
- 08H00 : UK GDP 0.2% EXPECTED VS 0.6% PREVIOUS
- 16H00 : US MICHIGAN CONSUMER SENTIMENT 63 VS 63.5 PREVIOUS
Market Movement Today:
- The Rand weakening in early European trading ahead of today’s CPI release.
- Joburg interbank traders all pointing to aggressive algo stop hunting in thin market conditions i.e. PRE-LONDON OPEN.
- In addition, leading analysts referring to misleading reports around Eskom and the planned maintenance at Koeberg.
- The fragile energy situation pounced on after Eskom announced a delay in full operational ability of one of its power units by 45 days.
- The headline erroneously indicating 2024.
- The local unit have also been on the back foot the past 2 session, especially after Friday’s better than expected NFP report
- The conditions, similar to the January jobs report, that sent risk assets sharply lower.
- However on this occasion, it appears to ZAR only after the Eskom report.
- Any debunking of this report likely to sharply reverse the recent losses.
- NB: markets remain fragile ahead of today’s key US CPI report at 14h30.
- With 5% CPI YOY expected, either side likely to have extreme moves.
- Higher = hawkish = negative risk (weaker ZAR)
- Lower = dovish = positive risk ( stronger ZAR)
- Early London trading we notice the Dollar not making any great strides, vs the Euro, Pound or Yen.
- The SP500 also firmly above 4100 as traders snap up bargains, in anticipation of a “pausing” Fed.
- USD 101.50 -0.1%
- SP500 4125 +0.20%
- EURUSD 1.0977 +0.14%
- US10YT 3.51%
- Trade : TRADE SELL USDZAR ON RALLIES – the ZAR blow-off offering excellent opportunities for exporters
- USDZAR : Expect a range 18.5000-18.8300
- Importers : 18.6100-18.5000
- Exporters : 18.7200-18.8300
- EURZAR : Expect a range of 20.2700-20.6900
- Importers : 20.4100-20.2700
- Exporters : 20.5500-20.6900
- GBPZAR : Expect a range of 23.3400-23.8200
- Importers : 23.5000-23.8200
- Exporters : 23.6600-23.8200
- USDZAR : 18.6600
- EURZAR : 20.5100
- GBPZAR : 23.6100
- Eskom looks set to continue struggling to keep the lights on as it has pushed the deadline for returning Unit 1 at the Koeberg nuclear power station by at least a month-and-a-half amid delays on the life extension project.
- This became apparent yesterday when Eskom told Parliament that the current delay to return Koeberg online was around 45 days.MONEWEBV
- The newly appointed SA Tourism acting chief executive Nomasonto Ndlovu has been implicated in bribery.
- This comes after a whistle-blower called the SA Tourism hotline to report that Ndlovu had allegedly accepted a R100 000 bribe from Qatar Airlines for flights in business class,
- accommodation, and World Cup tickets. IOL
- US stock futures held steady on Wednesday as investors geared up for a key inflation report that could influence the Federal Reserve’s next interest rate decision.
- On Tuesday, the Dow fell 0.17%, the S&P 500 dropped 0.46% and the Nasdaq Composite declined 0.63%, with eight out of 11 S&P sectors finishing lower.
- Those moves came as investors awaited an update on the debt ceiling negotiations, with a meeting between President Joe Biden and congressional leaders after market close yielding little progress.
- Meanwhile, the upcoming CPI report is expected to show inflation remained elevated with the monthly rate rising by 0.4% and the headline number staying at 5%. CNBC
- The yield on the US 10-year Treasury note decreased slightly to 3.5% on Tuesday, following its peak of 3.52% on Monday.
- Investors assess the monetary policy outlook and await the US inflation report on Wednesday.
- The payrolls report for April showed a larger-than-expected job gain and rising wage inflation, which has tempered fears of a recession and made it more difficult for the Federal Reserve to justify cutting interest rates.
- At the same time, traders are continuously evaluating the health of the banking sector,
- with the Fed’s Loan Officer Survey illustrating a persistent tightening of lending conditions, primarily due to the impact of the Fed’s monetary policy as opposed to the recent banking turmoil.
- in the meantime, short-term Treasury yields have increased as the debt-ceiling deadline draws near. Reuters
- DOW minus 56 to 33,561
- SP500 fell 18 points to 4,119
- NASDAQ minus 77 to 12,179
image: Trading economics
The US Dollar
- The dollar index fell to around 101.5 on Wednesday, snapping a two-day advance as investors cautiously awaited a key US inflation report.
- Traders acutely aware that could it could guide the outlook for Federal Reserve monetary policy.
- The upcoming CPI report is expected to show inflation remained elevated with the monthly rate rising by 0.4% and the headline number staying at 5%. Last week, the Fed delivered a widely expected 25 basis point rate hike but opened the door for a possible end to its aggressive tightening cycle. Meanwhile, the dollar came under pressure from ongoing negotiations over the US debt ceiling, after a meeting between President Joe Biden and congressional leaders late on Tuesday yielded little progress. Fx news
- Asian Stocks Fall Ahead of US Inflation Data, tracking losses on Wall Street overnight as investors braced for a key US inflation report.
- The report could influence the Federal Reserve’s next interest rate decision.
- The S&P/ASX 200, Nikkei 225, Kospi, Hang Seng and Shanghai Composite indexes all declined.
- In Japan, the Nikkei 225 fell 0.4% to around 29,125, giving back gains from the previous session.
- Caution dominated sentiment ahead of key US inflation data that could throw light on whether the Federal Reserve will need to tighten policy further.
- Investors also reacted to data showing Japan’s foreign reserves reached eight-month highs in April as authorities conducted no currency intervention operations in the first quarter of 2023.
- WTI crude futures fell toward $73 per barrel on Wednesday, snapping a 3-day advance.
- Investors cautiously waiting for a key US inflation report that could influence the Fed’s next rate decision.
- Markets also digested industry data showing US crude inventories increased by 3.618 million barrels last week, defying expectations for a 1.6 million barrel decline.
- But, oil prices rose for a third straight session on Tuesday after the Biden administration said it was cancelling some 140 million of previously mandated crude sales from the SPR.
- Instead it will purchase crude to refill the SPR later this year.
- Analysts also suggested that a weakening demand outlook due to slowing global growth,
- And concerns about elevated global supply were overstated, keeping the market supported. Gulf energy news
- Bullion remained above $2,020/oz, holding its ground as investors braced for key US inflation.
- US consumer inflation data will be released on Wednesday while producer inflation data will be released on Thursday.
- Last week, the metal reached near-record highs on dovish hints from the Fed, as well as heightened economic uncertainties and renewed concerns over the banking sector in the US.
- However, gold prices pulled back as US recession fears eased, with analysts suggesting that recent economic concerns were overstated. Kitco metals report