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Morning NOTE

12 October 2022


The ZAR traded in a wide  range ahead of tonight’s  FOMC minutes , PPI and most importantly tomorrow’s US CPI data.


  • The Rand traded in a wide range of 18.2300-17.9800, on the back of investor nerves ahead of key data releases in the next 2 sessions.
  • The Rally towards 17.9800 on the back of “ improved “ Inflation expectations after a Fed survey found, households expect inflation to be lower in 2023.
    • This consensus remains that households are feeling the pinch on the back of aggressive FED policy hiking
    • Consumers expect the inflation rate a year from now to be 5.4%, the lowest number in a year and a decline from 5.75% in August, according to a New York Fed survey.
  • The result was “risk rally “ that had a bit of desperation attached to it, after bond yields ignored the report and continued to rise.
    • The US10YT hitting 3.98% before settling at 3.90% and in turn supporting a rampant US dollar.
  • However, the rally stalled after, Cleveland Fed President Loretta Mester also said the central bank needs to tighten further to get ahead of inflation.
  • The US dollar index above 113 and rising for the 6th straight session and marching toward a 20-year high reached last month.
    • The Buck supported by bets for further Federal Reserve monetary tightening and robust safe-haven demand.
  • In addition,
    • The Japanese yen weakened past ¥146/$ and in turn falling to its lowest level in 24 years.
    • It has now moved past levels that prompted the BOJ  to intervene in the currency markets last month for the first time since 1998.
    • The yen has come under constant pressure due to a widening policy divergence, as the BOJ remains committed to ultra-easy policies vs the US FED aggressively tightening to combat inflation.
  • Markets currently remain in a RISK OFF environment on the back of global yields.
  • Locally SA manufacturing surprised to the topside, with Month on month for August seeing growth of 2.1% vs 0.8% expected
    • and YOY +1.4% VS -2% EXPECTED.
  • NB: Although the data printed better than expected markets pretty much ignoring it as the FED remains the only game in town.

Significant Market Data




    • 14H30 : US CPI YOY 8.1% EXPECTED VS 8.3% PREVIOUS ***
    • 14H30 : US CORE CPI YOY 6.5% EXPECTED VS 6.3% PREVIOUS  




  • The ZAR opened inside the range, indicating a market that remains in limbo ahead of key data releases.
    • It would not be unreasonable to market makers to drive stop hunts and test both sides of the range. (18.2300-17.9800)
  • This morning we expecting some ZAR gains on the back of exporters bagging some profits,  after some overnight ZAR weakness in Asian trading .
    • However, Dips in USDZAR  towards the figure, provide good opportunities for importers to exact some cover for short term invoicing commitments.
  • NB: The rising US yields remains supportive of the Dollar and once again keeping the local unit firmly above R18/$ .
  • Once again, during the his heavy data week, we encourage clients to exact prudent risk management and hedge at least 50% of their exposures.
  • The data will be closely watched and US CPI will be the key driver this week.
  • It will affect yields and so determine the next path of the ZAR
  • The trade remains

Expected Ranges

  • USDZAR :  Expect a range 18.0100-18.3400
    • Importers 18.1200-18.0100
    • Exporters 18.2300-18.3400 
  • EURZAR :  Expect a range of 17.5400-17.7500
    • Importers 17.6100-17.5400
    • Exporters 17.6800-17.7500
  • GBPZAR :  Expect a range of 19.7100-20.2500
    • Importers 19.8900-19.7100
    • Exporters  20.0700-20.2500


  • USDZAR 18.1500
  • EURZAR 17.6500
  • GBPZAR 19.9300


  • ESKOM : The eThekwini Municipality said on Tuesday night that an explosion at the 275kv Klaarwater major substation caused widespread power outage to about 50% of the city.
    • The municipality warned residents that areas in the northern, western and southern regions of the city would be without power.
    • Officials also pleaded with locals to switch off unnecessary loads such as aircons and geysers, saying it would help restore supplies without overload trip outs. EWN 
  • Following the Covid-19 pandemic, and the current high inflation environment and  with the SARB raising rates,  
    • it was reported that, Businesses liquidations in South Africa jumped by 44.8% in the year to end-August 2022.
    • The latest numbers are contained in Statistic SA’s Liquidations Report for the period.
    • Fewer companies also entered business rescue in a clear sign that many are assessing their financial positions too late.
    • These were comments Werksmans Attorneys Director Eric Levenstein. IOL
  • The IMF cut forecasts for global economic growth for 2023.
    • The fund stating the fallout from Russia’s invasion of Ukraine, spiralling cost-of-living and economic downturns.
    • The WAR  driving up food and energy prices following the coronavirus outbreak while soaring costs and rising interest rates threaten to reverberate around the globe.
  • In addition, The IMF lowered its growth forecast for South Africa.
    • It now expects the economy to grow by only 2.1% this year – in July it was still expecting growth of 2.3%.
    • For next year, it now sees growth of 1.1% – from 1.4% previously.
    • In contrast, it expects Sub-Saharan Africa to grow by 3.7% next year. NEWS24



  • In regular trading on Tuesday, the Dow gained 0.12%, while the S&P 500 and Nasdaq Composite lost 0.65% and 1.1%, respectively.
    • Traders now focussed on the September PPI and minutes from the Federal Reserve’s last meeting due later in the global day to guide the rates outlook.
  • Cleveland Fed President Loretta Mester also said the central bank needs to tighten further to get ahead of inflation.
    • Moreover, the IMF warned that “the worst is yet to come” for the global economy as high inflation, tighter financial conditions, geopolitical risks and the lingering Covid-19 pandemic “weigh heavily on the outlook.” Source: Bloomberg


  • The US 10-year yield, eased below 3.9% as investors reassessed the outlook for monetary policy ahead of crucial US inflation reports.
    • Last week’s strong jobs print and hawkish rhetoric from Fed officials reinforced the view that the US central bank will keep interest rates higher for longer to cool an overheated economy.
    • This week, the PPI and CPI figures scheduled for Wednesday and Thursday will offer further clues about the Federal Reserve’s rate path.
    • The market movement came as investors digested the Bank of England’s decision to expand its emergency bond purchase program to include inflation-linked British government bonds to avoid a meltdown in the UK pensions sector
    • Such a move offered some relief to markets, indicating that despite the ongoing tightening cycle, central banks will move fiercely to rescue their economies.
  • However, later in the session, the Bank of England said it would be removing market support as scheduled and urged pension funds to unwind positions they can’t maintain.


  • The Dow fell 93 pts to 29,202
  • The SP500 fell 27 to 3,612
  • The Nasdaq  declined 110 to 10,542


Asian markets mixed to higher on the back of a mixed session on Wall Street.

  • In Japan, the Nikkei 225 declined 0.02% to close at 26,397, declining for the 3rd straight session on mounting concerns about surging inflation.
    • Tighter global financial conditions and the risk of a global recession.
      • The IMF downgraded its 2023 growth forecast for the global economy, warning that “more than a third of the global economy will contract this year or next,” and that “2023 will feel like a recession” to many people.
      • Investors are also tracking the yen, which sank to a fresh 24-year low past 146 against the dollar.
      • Meanwhile, sentiment was lifted in mid-day Asia following reports that the BOE  may extend its emergency bond purchases, although this decision appears to be hanging in the balance.
  • In Australia, the ASX 200 edged up 0.04% to close at 6,648 on Wednesday, ending  a 3-day decline as gains in financial firms outweighed losses in the commodities sector.
    •  Still, tightening financial conditions, rising risks of a global recession and China’s Covid-related woes kept the pressure on Australian stocks.  |Reuters
  • The US dollar moved above 113 on Wednesday, rising for the 6th straight session and marching toward a 20-year high reached last month.
    • The Buck supported by bets for further FED monetary tightening and robust haven demand.
  • Investors also awaited minutes of the last FED meeting to guide the rates outlook.
    • In addition we await key US inflation readings this week that could cement expectations for another supersized rate hike from the Fed in November.
    •  The dollar extended gains against the euro and sterling, while hovering over two-year highs against the Australian and New Zealand dollars.
    • Meanwhile, the greenback surged to fresh 24-year highs against the yen amid a widening policy divergence and rate differentials. |FX news
  • Brent crude fell below $94/bl on Wednesday, declining for the 3rd straight session, pressured by mounting risks of a global recession that would significantly weaken energy demand.
    • Demand worries returned after the IMF downgraded its 2023 growth forecast for the global economy.
    • The fund citing high inflation, tighter financial conditions, and Russia’s invasion of Ukraine, saying “more than a third of the global economy will contract this year or next”.
    • Also that “2023 will feel like a recession” to many people.
    • The Fed’s aggressive tightening campaign to quell surging inflation, a strong dollar and China’s Covid-related woes also weighed on the global outlook and energy markets. |Gulf Energy news


  • Gold prices declined towards $1,660/oz on Wednesday, declining for the sixth straight session.
    • Bullion pressured by a strong US dollar and elevated Treasury yields on expectations that the US Federal Reserve will deliver more rate hikes to combat inflation.
      • Investors are also bracing for minutes of the US central bank’s last policy meeting on Wednesday and key US inflation data on Thursday to guide the rates outlook.
    • Bullion continues to trade inversely to US interest rates. i.e. rising rates = lower gold prices and, lower rates = higher gold prices.  | Kitco metals


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