The ZAR lost ground due to stop hunting over the easter weekend as liquidity conditions evaporated.
The Rand lost nearly 2.5% to reach 18.5500 in poor trading conditions, allowing Algo’s to chase stops.
- This was evident in the SP500 as well as the Euro and the Dollar index.
- This morning the move appears to be reversing as Risk assets rebound allowing for sharp ZAR gains.
- The local unit reaching 18.3500 in early trading (20 cents stronger as liquidity returns).
- Friday’s jobs report were mixed with the unemployment rate dropping to 3.5% and NFP reporting at 236k vs 239k expected.
- Traders adjusting their outlook for the FED Funds for another 25bps hike at the next meeting.
- The week ahead, allows for another key US CPI data,
- As well as the FED FOMC Minutes at 20h00 on Wednesday.
- As well as US PPI on Thursday.
- Us10YT : 3.40%
- DXY : 102.30
- Euro : 1.0900
- USDZAR : 18.3500
Data This week
- 13h00 : SA MANUFACTURING PRODUCTION EXPECTED -2.15% VS -3.7% PREVIOUS YOY
- 14H30 : US INFLATION – CPI EXPECTED 5.2% YOY VS 6% PREVIOUS
- 14H30 : US INFLATION – CPI EXPECTED 0.2% MOM VS 0.4% PREVIOUS
- 14H30 : US CORE INFLATION – CORE CPI EXPECTED 5.6% YOY VS 5.5% PREVIOUS
- 20h00 : US FED FOMC MINUTES
- 08H00 : UK GDP MOM 0.1% EXPECTED VS 0.3% PREVIOUS
- 11H30 : SA MINING PRODUCTION +1.75% EXPECTED YOY VS -1.9% EXPECTED
- 14H30 : US PPI 3% EXPECTED YOY VS 4.6% PREVIOUS
- 14H30 : US RETAIL SALES 3.2% EXPECTED VS 5.4% PREVIOUS
Market Movement Today:
- The Rand recovering sharply following the stop loss run on Easter Monday.
- Unfortunately the local unit remains defenceless against algo induced trading when local liquidity is removed.
- The ZAR hitting 18.5500 before recovering to 18.3500 at the time of writing.
Friday’s mixed jobs report out of the US have traders pricing in a 25 bps hike at the next meeting.
- The result a rise in US yields and also support for the Dollar.
- NB: If they do hike, many believe it will be the last in the cycle.
- This will provide support to risk assets as the SP500 remains above 4100.
- Tomorrows INFLATION REPORT, likely to re-affirm the slowdown and decline in inflation and clues for the path forward.
- We continue to advise that a slowdown or stopping of fed hikes, will be ZAR supportive.
- Thus – these remain good levels for exporters.
Trade : SELL USDZAR on Rallies.
- Buy 18.2000
- Sell 18.50000
- USDZAR : Expect a range 18.3100-18.6100
- Importers : 18.4100-18.3100
- Exporters : 18.5100-18.6100
- EURZAR : Expect a range of 19.8900-20.2200
- Importers : 20.0000-19.8900
- Exporters : 20.1100-20.2200
- GBPZAR : Expect a range of 22.6700-23.0600
- Importers : 22.8000-22.6700
- Exporters : 22.9300-23.0600
- USDZAR : 18.4400
- EURZAR : 20.0700
- GBPZAR : 22.8800
- The City of Tshwane said the collapse of several electricity powerlines in the capital city was caused by vandalism and theft.
- At least seven electricity pylons fell onto the N4 highway on Monday, cutting off power to thousands of households,
- and blocking off traffic between the Solomon Mahlangu and Simon Vermooten offramps.
- While officials were able to clear the high-voltage powerlines from the road, residents remained in the dark on when electricity would be restored.
- New City mayor Cilliers Brink blamed the extensive damage on criminals who were stripping off metal from the base of the pylons, compromising the infrastructure. News 24
JOBURG’S WASTE WOES: CITY FAST RUNNING OUT OF LANDFILL SPACE
- The City of Johannesburg collects tonnes of solid waste every day and is fast running out of landfill space.
- The rapid population growth in what is Gauteng’s economic hub is a major contributing factor, said the municipality.
- MMC for Environment and Infrastructure Services, said the city sees almost 10,000 new people every month.
- The influx leaving the municipality under immense pressure to keep up with the amount of solid waste generated.
- Eyewitness News takes a look into this problem and how it can be resolved. EWN
- Eskom said that stage 5 load shedding was on the cards later on Tuesday.
- The struggling utility said that when stage 3 ends at 4PM on Tuesday afternoon, stage 5 would kick in and end at 5AM on Wednesday morning.
- The power utility attributed the alternating stages of load shedding to capacity constraints as a result of some power stations not returning to service. News24
US stock futures held steady on Tuesday after the major averages ended mixed during Monday’s regular session.
- Investors look ahead to key inflation data later this week for clues on the Federal Reserve’s rate-hiking campaign.
- Futures contracts tied to the three major indexes drifted flat to slightly positive.
- In regular trading on Monday, the Dow and S&P 500 gained 0.3% and 0.1%, respectively, while the Nasdaq Composite shed 0.03%.
- Friday’s jobs data from the US Labour Department revealed a still-tight labour market, supporting bets for another Fed rate hike in May but easing some concerns that the world’s largest economy is heading toward recession.
- Focus now turns to the US CPI report due on Wednesday and the first batch of companies reporting first-quarter financial results for further clues about the economy’s health and the likely future path for monetary policy
- The yield on the US 10-year note reversed early losses to trade higher above 3.41% to kick off the second week of April.
- Investors return from the Easter weekend and continue to assess the economic and the monetary policy outlook.
- Most investors now see the Fed delivering another 25bps increase in the fed funds rate in May, after the payrolls report continued to point to a tight labour market,
- with the economy adding 236K jobs and the unemployment rate dropping to near record lows to 3.5%.
- Traders now await consumer and producer inflation releases and FOMC minutes for further clues on the Fed’s next move.
- On Friday, the ten-year yield jumped as much as 11bps after the NFP release while the two-year rose as much as 15bps to 3.97%. Bloomberg
- The Dow rallied 101 to 33,586
- The SP50 added 4 points to 4,109
- The Nasdaq fell 3 to 12,084
image: Trading economics
The US Dollar
- The US dollar strengthened toward the 103 mark as investors bolstered bets that the Federal Reserve would hike rates in May following Friday’s payrolls data.
- The US Labour Department’s closely watched report showed the U.S. nonfarm payrolls increased by 236,000 jobs in March, coming close to expectations of 239,000.
- The unemployment rate also fell to 3.5% compared with the forecasts of 3.6%.
- Markets are now pricing in an over 70% chance that the Fed would raise rates by 25 basis points next month.
- Investors also await the US CPI report later this week for further clues on the tightening path.
- The dollar’s strength was seen across the board, with some of the most pronounced buying activity against the Japanese yen.
- This after Japan’s new central bank governor, Kazuo Ueda, hinted at an accommodative monetary stance. FX NEWS
- In Japan, the Nikkei 225 gained 1.05% to close at 27,923, with both benchmarks rising for the third straight session.
- New Bank of Japan governor Kazuo Ueda said in his inaugural news conference that it was appropriate to maintain the bank’s ultra-loose monetary policy.
- He said, this is appropriate as inflation has yet to hit 2% sustainably, aiding market sentiment.
- Technology stocks led the charge, with strong gains from Tokyo Electron (3.7%).
- In Australia, ASX 200 Index jumped 1.26% to close at 7,310 in post-holiday trade on Tuesday, hitting its highest levels in a month.
- Investors also digested data showing Australian consumer sentiment rose to a ten-month high in April, while business confidence showed improvement.
- Heavyweight miners led the charge, with strong gains from BHP Group (2.1%), Fortescue Metals (2.9%), Rio Tinto (1.9%).
- Financial and technology firms posted strong gains as well, including Macquarie Group (1.1%), Westpac Banking (1.8%) and Computershare (1.7%). Reuters
- WTI crude futures rose above $80 /bl on Tuesday as the prospect of tighter supply from OPEC+ overshadowed concerns about further interest rate hikes that could hurt energy demand.
- The US oil benchmark jumped nearly 7% last week after OPEC+ unexpectedly announced that it will reduce output by 1.16 million barrels per day from May until the end of 2023.
- After the announcement, Saudi Arabia raised its May crude prices to term customers in Asia and the US.
- as well as the monthly reports from OPEC and the IEA that will provide updated forecasts for oil demand and supply. Energy News
- Gold prices traded above $2,013/oz after falling over 1% in the previous session.
- The US dollar eased ahead of key US inflation data.
- Traders now see the Fed as 71% likely to raise rates by another quarter point in May after data released Friday showed US employers continued to hire at a strong pace in March.
- They currently expect the Fed to start cutting rates from around September.
- Meantime, the IMF said Monday in a report that rates in the US and other industrial countries will revert toward ultra-low levels while those in emerging countries are more mixed.
- Financial markets have been pessimistic about the US economy since some small US banks collapsed in March.