View this email in your browser

Morning NOTE

12 April 2023


The ZAR rebounded and consolidated off its weakest levels reached on Monday during poor liquidity conditions.


The Rand recovered to reach 18.2400 after a wild stop hunt on Monday, saw the local unit trade above 18.5000.

  • The local unit consolidating after Monday’s wild swings as algo’s had a field day. The price action was also evident in the SP500.
    • The world’s largest equity futures contract enduring +/- 100 points swings in one session.
  • Today however, we welcome the latest US CPI (inflation report).
    • Markets are once again expecting a lower print,  more evidence that the transmission / lagging effect;
      • of the record pace of rate  hikes are starting to manifest in the real economy.
  • The recent banking crises, and the deposit withdrawals into money markets, also affecting the drop in the Money supply.
  • Some context :
    • Interest Rate hikes are used to reduce money supply and hence combat inflation.
      • The recent banking crises – and the deposit withdrawals – had the same effect (as a rate hike) as bank lending dropped sharply during this period.
        • Banks tried to replenish their liquidity situation , rather than lend out money to consumers (i.e. increase money supply).
        • Recent data showing bank lending down nearly $100bn in 2 weeks , the largest fall since 2001.
          • Thus – the bank crises had the same effect as a rate hike;
    • Conclusion – it would be very hard for inflation to surprise to the upside under these circumstances.
  • What does this mean for the Dollar?
    • Well with the FED, effectively playing the 18th hole (Golf), in terms of rate hikes,
    • We expect risk assets to benefit significantly, when the World’s largest Central bank hits the pause button;
    • The rerating already happening with the SP500 above 4100, and even Bitcoin trading above $30,000/coin
  • NB: This WILL BE ZAR SUPPORTIVE, as we move into the latter parts of Q2 and H2 of 2023.

Today we await the US CPI as well as US FOMC minutes.

  • Us10YT : 3.43%
  • DXY : 102.12
  • Euro : 1.1.0920
  • SP500 : 4,111
  • USDZAR : 18.3500

Data This week


    • DATA Disappointed with -5.2% actual vs the -2.25% (load shedding continues to hammer the sector).


  • 20h00 : US FED FOMC  MINUTES


  • 08H00 : UK GDP MOM 0.1% EXPECTED  VS 0.3% PREVIOUS



Market Movement Today:

  • The Rand recovered after Monday’s holiday sell-off.
    • This morning the local unit trading at stronger levels (18.3500) but also under pressure ahead of today’s US CPI report.
    • The ZAR tracking the EURUSD in early trading,
  • The single currency also suffering at the hands of early profit taking at  the start of the European open.
  • NB: in the ABSENCE OF NEWS, market makers/order book runners looking to collect stops on both sides of the range.
  • BUT ; We expect range trading as we head into the data release at 14h30.
    • AND It is unlikely we see large range extensions ahead of the CPI report.
    • Thus – range for the session (pre -14h30)
  • In addition we have the FOMC MINUTES at 20h00.
    • The minutes will be important and if the language “data dependent“ comes up, that will be a green light for risk assets.
    • Provided the US CPI continues to trend lower.
    • Markets once again flip flopping on a Fed hiking by 25 bps in May.
  • Trade : SELL USDZAR on Rallies.
    • Buy : 18.2500
    • Sell : 18.50000

Expected Ranges:

  • USDZAR : Expect a range 18.2700-18.4500
    • Importers : 18.3300-18.2700
    • Exporters : 18.3900-18.4500
  • EURZAR : Expect a range of 19.9800-20.1300
    • Importers : 20.0300-19.9800
    • Exporters : 20.0800-20.1300
  • GBPZAR : Expect a range of 22.7500-22.9300
    • Importers : 22.81000-22.7500
    • Exporters : 22.8700-22.9300


  • USDZAR : 18.3500
  • EURZAR : 20.0500
  • GBPZAR : 22.8300


  • Top  African National Congress (ANC) leaders were on Tuesday evening due to meet with the party’s former leader Thabo Mbeki.
    • They were here to discuss current President Cyril Ramaphosa’s Phala Phala saga.
    • The meeting was expected to take place at the ANC’s Luthuli House headquarters in Johannesburg.
    • This follows a leaked letter by the former statesman to ANC Deputy President Paul Mashatile.
    • Mbeki raised concerns over the ANC’s handling of the allegations surrounding the theft of millions at Ramaphosa’s Limpopo-based farm.
    • However, top ANC leader’s calls on Mbeki to use his ‘wisdom’ to ‘counsel’, rather than criticise Ramaphosa
  • Massive electricity outage still affecting large parts of Pretoria
    • The collapse of several electricity pylons, partly because of vandalism, forced the closure of a section of the N4 highway over the long weekend.
    • Significant parts of Pretoria east and north are still without electricity following the collapse of several electricity pylons during a storm on Sunday night. Moneyweb
  • South Africa’s central bank Governor Lesetja Kganyago called for sweeping reforms to macroeconomic policies to boost economic growth, and lessen exchange rate volatility and sovereign risk.
    • Proposed changes include structural reforms,
    • deregulation of the nation’s transport and electricity sectors,
    • lowering the inflation target and a shift back to predictable, transparent fiscal policy rules.
    • Kganyago said in a speech at the Peterson Institute for International Economics in Washington Tuesday.
    • Lowering the inflation target to 3%, the bottom of the current range, will be a “major benefit to fiscal policy” and economic growth, the governor said.
    • It will also reduce the potential for an upward drift in the real exchange rate and cut loan-service costs for the country’s over-indebted public sector, he said. Moneyweb


  • US stock futures held steady on Wednesday as investors cautiously awaited a key US inflation report.
    • The CPI DATA could influence the trajectory of the Federal Reserve’s interest rate decision in May.
    • Futures contracts tied to the three major indexes drifted flat to slightly positive.
  • In regular trading on Tuesday, the Dow rose 0.29% and the S&P 500 ended flat, while the Nasdaq Composite fell 0.43%.
    • Nine out of the 11 S&P sectors finished higher led to the upside by energy, while technology stocks underperformed the market.
    • Last week’s jobs data pointed to a still-tight labour market, reinforcing bets of another 25 bps rate hike in May but easing some concerns that the US economy is near recession.
    • Investors now await a slew of economic data and corporate results,
    • Earnings include those from big US banks, for clues about the economy’s health and the likely future path of interest rates.


  • The yield on the US 10-year moved higher above 3.41% to kick off the second week of April.
    • Traders 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.
    • Citing  the payrolls report, continues 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%.


  • The Dow gained 98 points to 33,684
  • The SP500 flat at 4,108
  • The Nasdaq lower 52 points to 12,031

  image: Trading economics


The US Dollar

  • The US dollar held around 102.1 in subdued trade on Wednesday after losing some ground in the previous session.
  • Investors cautiously awaited a key US inflation report that could influence the Federal Reserve’s interest rate decision in May.
    • A slew of Fed speakers offered little clues on how much further US interest rates would rise,
    • Earlier, New York Fed President John Williams saying that the central bank’s policy path will depend on incoming data.
    • Money markets are now pricing in a much higher chance that the Fed will deliver another 25 basis point rate hike next month.
      • Meanwhile, Philadelphia Fed Bank President Patrick Harker said Tuesday he feels that the end of rate hikes may be near.
      • Money markets are pricing in a roughly 74% chance that the US central bank will raise rates by 25bps in May.
      • BUT multiple rate cuts are also being priced in as early as July through to the end of the year. FX NEWS

Asian markets
Stock markets in the Asia-Pacific region were mostly higher on Wednesday.

  • However, investors avoided taking a lot of new positions ahead of the US inflation and FOMC release later in the day which could provide further clues on the Fed’s next steps.
  • in Japan, the Nikkei 225 Index climbed 0.6% to close at 28,083, with both benchmarks rising for the fourth straight session.
    • But, the  market caution capped gains ahead of a highly anticipated US inflation report that could influence the Federal Reserve’s interest rate decision in May.
    • Recall, the new BOJ governor Kazuo Ueda said it was appropriate to maintain the bank’s ultra-loose monetary policy.
    • His reasons : inflation has yet to hit 2%.- the comments boosting market sentiment.
  • In China, the Shanghai Composite rose 0.4% to above 3,320. Stocks struggling for direction amid a lack of clear market signals.
    • On Tuesday, data showed that China’s consumer inflation unexpectedly slowed in March, while producer inflation eased further to a 33-month low.
    • The inflation figures suggested persistent demand weakness, but raised hopes for further policy easing. Reuters

Crude oil

  • US WTI crude oil prices remained above $81/bl after jumping more than 2% in the previous session.
  • Prices underpinned by signs of tighter global oil supplies and an industry report that pointed to another decline in US crude inventories at a key storage hub.
    • Shipments from Russia have weakened after Moscow vowed to reduce production.
      • Bloomberg reported. In the US, data from the American Petroleum Institute (API) showed that;
    • US crude stockpiles at the nation’s key storage hub at Cushing, Oklahoma contracted by 1.4 million barrels last week.
    • The US oil benchmark is also trading close to its highest levels in over two months,
  • Price remained supported by a surprise announcement from OPEC+ that it will reduce output by 1.16 million barrels per day from May until the end of 2023. Bloomberg energy


  • Gold prices rallied and once again reached  $2,020/oz.
    • Prices continuing its upside momentum for the second straight day, amid a pullback in the US dollar.
      • Market participants put their focus on key US inflation data due later today for clues on the path of Federal Reserve interest rate hikes.
  • Elsewhere, the IMF said Tuesday it expects global growth of 2.8% this year and 3% in 2024, slightly below the fund’s estimates in January.
    • The fund added that the pressures in the banking sector have dissipated in recent weeks, but they have made the overall economic picture worse.
    • Lower rates will boost the appeal of Gold. Kitco metals report

Copyright ©
2023 RussellStone Treasury 
All rights reserved.

Our mailing address is:

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.