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Morning NOTE

12 January 2023


The ZAR continued to drift stronger, as traders await today’s US CPI report for December.


The Rand continued to drift stronger on the back of a risk asset rebound as stock trade higher ahead of today’s key US CPI report.

  • Risk assets continued its advance as traders bet on a benign inflation report, that could see a rates stall or even drift lower in 2023.
  • Markets anticipating the trend to continue with analysts expecting a print of 6.5% vs 7.1% previous YOY.
  • Stocks, Emerging market FX as well as the commodity complex all finding support as traders move away from the safe-have US Dollar.
  • Fed governors however continues to sound the Hawks alarm pushing for a terminal rate above 5%.
  • Softer data however supporting the view that the Fed is once again behind the curve.
  • Markets now awaiting US CPI at 15h30 CAT time.
  • A lower print likely to send yields lower as well as the Dollar.
  • The US10YT currently trading at 3.52% (traders betting on a 25bps hike in Fed by the FOMC).

Data this week





Market Movement Today :

The Rand drifted stronger to trade below 16.9000 ahead of today’s key  US CPI REPORT.

  • Risk assets appeared to have voted as the SP500 continues to power ahead at the expense of the Dollar.
    • The shift sending the Dollar lower across the board as risk assets attract favour at the expense of the safe-haven Dollar.
    • The Japanese Yen the biggest gainer trading at 131, after reaching a lowest level of 151 in October 2022.
    • This all supporting EMFX like the ZAR against the Dollar.
  • The ZAR continues to trade around the 17 handle and the ability to appreciate continues to exist if CPI prints lower.
  • This morning we once again expect a bit of weakening ahead of the European open (10CAT), as traders book profits.
    • This has been a common theme as traders unlikely to place large bets ahead of the US CPI print.
    • We expect a drift higher towards the R17 level, before the weaker Dollar/Stronger ZAR trend resumes.
    • The trend however remains in favour of the ZAR , and we look for opportunities to SHORT USDZAR.  
  • HEDGING ADVICE :  Given the SERIOUSNESS of today’s data release and the importance markets will attach to the data print;
  • We expect a significant increase in market volatility.
  • Against this back drop we encourage clients with short term FX risk to hedge at least 50% going into the 15h30 data print .


Expected Ranges:

  • USDZAR :  Expect a range 16.8100-17.0100
    • Importers 16.8500-16.8100
    • Exporters 16.9700-17.0100
  • EURZAR :  Expect a range of 18.0300-18.3800
    • Importers 18.1000-18.0300
    • Exporters 18.3100-18.3800
  • GBPZAR :  Expect a range of 20.3900-20.7400
    • Importers 20.4600-20.3900
    • Exporters 20.6700-20.7400


  • USDZAR 16.9100
  • EURZAR 18.2100
  • GBPZAR 20.5700


  • President Cyril Ramaphosa has said, that Eskom CEO, Andre de Ruyter, resigned because “it’s a tough job”.
    • Ramaphosa stressing that the government has a “cohesive” plan to resolve the national power shortage.
    • Ramaphosa said the government is not “sleeping on the job” with regard to the worst ever power cuts the nation has experienced.
      • Adding he has spoken to his ministers about the need for a uniform approach to the problem.
    • He did not indicate when a new CEO would be appointed or when load shedding would ease. News24

Eskom crises – stage 6 loadshedding as breakdowns continue.

  • In another cruel twist of fate, South Africans are bracing themselves for the ruling on a huge electricity price hike from ESKOM.
  • The National Energy Regulator of South Africa (Nersa) is set to rule on Eskom’s revenue application.
    • Households and businesses may have to contend with higher electricity prices if Eskom gets its way.
    • The power utility wants a 32% tariff hike for the 2023/24 financial year, and an additional 9% in 2024/25.
    • Nersa’s court-imposed deadline to rule on the application expired on Wednesday. EWN


  • President Cyril Ramaphosa is seeking an urgent interdict to stop the private prosecution led by former president, Jacob Zuma.
    • He will have to convince a full bench of judges on Thursday morning to grant an interdict.
    • Ramaphosa approached the court after Zuma charged him with being an accessory after the fact.
      • The charges relating to Zuma’s case against State prosecutor, Billy Downer, and journalist, Karyn Maughan.
      • He has accused them of breaching the NPA Act by leaking his confidential medical records in the arms deal case.
      • Zuma argues that Ramaphosa failed to act after the complaint was made. IOL


  • On  Wednesday, the Dow gained 0.8%, the S&P 500 jumped 1.28% and the Nasdaq rallied 1.76%.
    • US stock futures also held steady on Thursday as investors avoided making big bets ahead of a key inflation report.
    • It is widely anticipated that the data could influence the trajectory of Federal Reserve interest rate hikes.
    • Futures contracts tied to the three major indexes were all trading near breakeven.
    • BUT, markets remain cautious following a drumbeat of hawkish remarks from Fed officials this week and ahead of earnings reports from major banks on Friday. Reuters


  • The US10YT declined to reach 3.52% ahead of today’s key inflation report.
    • Markets all pricing for a lower inflation print, that would likely allow the Fed to slowdown on its hiking path.
    • Globally interest rates have started to drift lower as inflationary pressures appears to be easing across the globe.
  • Across the Pond, the UK’s 10-year yield also fell below 3.5%, down from a two-month high of 3.7% hit in December.
    • Investors have also digested hawkish remarks from key policymakers, warning about the risks of persistent inflation pressures from a tight labour market.
    • All saying it will strongly influence his monetary policy position in the coming months. Bloomberg


  • The Dow added 268 to 33,793
  • The Sp500 gained 50 to 3,969
  • The Nasdaq added 189 to 10,931.


  • The US dollar continued its slide towards 103 on Thursday.
    • The Buck sliding back to its lowest levels in seven months as investors cautiously awaited key US inflation data.
    • This correlating to the recent rise in the Japanese Yen.
    • Traders betting a benign inflation December inflation report likely to put more pressure on the Buck.
      • As it could influence the trajectory of Federal Reserve interest rate hikes.
    • Elsewhere, China’s reopening from Covid curbs that bolstered the outlook for the global economy,
      • as well as a budding rally in risk assets also added downward pressure on the dollar.
      • The dollar weakened across the board, with the most pronounced selling against the Japanese yen. FX news


  • The Japanese yen continued to rise vs the Dollar, reaching 132 /$ and approaching  its strongest levels in seven months.
  • This on growing speculations about the Bank of Japan’s possible shift from its ultra-easy policy,
    • after it unexpectedly doubled the ceiling of its tolerance band on 10-year JGBs in December.
  • Also, the yen gained  as investors bet that upcoming US inflation data would show further easing.
  • Thus supporting the case for a slower pace of interest rate hikes from the Federal Reserve. Forex live

Asian markets all higher across the region.

  • Markets mostly rose on Thursday, tracking Wall Street higher.
  • In Japan, the Nikkei 225 rose 0.01% to close at 26,450, as investors bet that upcoming US inflation data would show further easing.
    • The data could influence the trajectory of FED interest rate hikes.
    • Also, if lower CPI then the case for a less aggressive tightening lifted Japanese technology stocks.
    • Investors also buoyed after data showed Japan’s current account surplus exceeded forecasts in November.
    • And, bank lending remained solid in December resulting in Japanese banks leading  the gains. CNBC
  • Brent crude futures rose to $82.5/bl and US WTI crude oil also stabilized around the $77.5/bl level.
    • Prices supported by a “re-opening” of China, and an improved demand outlook from the world’s largest crude importer.
    • Concerns about the impact of sanctions on Russian supply also supported oil prices.
    • Oil prices also firmed up ahead of a key US inflation report, as investors are betting that it would show further easing in price pressures,
    • Thus supporting the case for a less aggressive tightening from the Federal Reserve and help future demand. Gulf Energy News
  • Gold prices rose above $1,880/oz near its strongest levels in 8 months as the Dollar continues to weaken.
    • Broad based dollar weakness continues to support the yellow metal, as investors cautiously awaited key US inflation data.
    • A lower than expected inflation print likely to drive Gold prices higher as it could influence the trajectory of Federal Reserve interest rate hikes.
    • Investors are betting that the December CPI report would show further easing in price pressures.
    • Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion and vice versa. Kitco metals report

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