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Morning NOTE

13 September 2022


The ZAR strengthened  sharply on the back of improved risk sentiment ahead of today’s key US CPI report.


  • The Rand gained 1.50% vs the US Dollar on the back of improved global risk sentiment ahead of today’s US Inflation report.
    • Traders reducing long Dollar bets ( i.e. higher interest rates & inflation) in favour of the “ inflation has peaked” theory and slower rate rises.
    • The idea that the Fed will remain on the rate rises path but at smaller intervals, sparking a risk rally that saw the SP500 gain more than 6% in the last 4 sessions.
  • Slower economic growth data supporting a view that if will filter through into inflation data as well as INFLATION EXPECTATIONS (what Powell is looking at!).
  • The Dollar index now firmly below its recent peak to open at 108.20 ahead of today’s CPI at 14h30.

Significant Market Data

  • Tuesday :
    • 14h30  : US CPI EXPECTED 8.1% VS  PREVIOUS 8.5% YOY
    • 14h30  : US CPI CORE  EXPECTED 6.1% VS PREVIOUS 5.9% YOY
  • A softer print likely to support Risk assets and a stronger ZAR,
    • but a Higher inflation print
      • … could lead to a sharp reversal as it will be supportive of the FED policy and we can see some more weakness.


  • This morning we once again opening STRONGER on the continued improvement of risk sentiment.
    • Stocks are well BID across the Asian region, supporting a stronger ZAR (at least until the US DATA RELEASE).

Given the recent volatile nature of economic data release,

  • It is advisable for clients with short term commitments, to consider hedging 50% of their exposure before the US CPI report.
  • This would ensure some form of Risk management is in place.
  • A decision could then be made post the release with the remaining balance.

Expected Ranges

  • USDZAR :  Expect a range 16.9800-17.2800
    • Importers 17.0300-16.9800
    • Exporters 17.1800-17.2800
  • EURZAR :  Expect a range of 17.1300-17.4700
    • Importers 17.2700-17.1300
    • Exporters 17.3700-17.4700
  • GBPZAR :  Expect a range of 19.8700-20.2100
    • Importers 19.9300-19.8700
    • Exporters  20.1000-20.2100


  • USDZAR 17.0800
  • EURZAR 17.3300
  • GBPZAR 20.0200


  • Eskom has announced it will be ramping-up power cuts, with stage 4 set to kick in at 10am on Tuesday morning.
    • The power utility said that a sudden outage of three Kendal power station units had forced them to increase the level of rolling power cuts.
    • This round of power cuts will run until 5am on Thursday morning.
    • The power utility said that it would release more details in due course.
    • News have since emerged that 42 of its electricity generation units had tripped over the past week.  EWN
  • Following the break of the mining dam wall, President Cyril Ramaphosa took to the area on Monday following an accident at a local mine that caused damage to an estimated 100 homes on Sunday.
    • He said, the government will provide extensive support to the people of Jagersfontein.
    • Details have since emerged that, the Free State government and the Mineral Resources Department allegedly turned a blind eye to warnings of potential danger and instability at the Jagersfontein mine. IOL
  • After splitting from ABSA , Barclays Plc announced it is expanding private-banking services in Africa, looking to target the continent’s $2 trillion high-net worth market.
    • The British lender has hired nine bankers from Credit Suisse Group AG based in mainly Dubai, London and Zurich after agreeing a deal to handle clients referred by the Swiss rival.
    • This will be done through organic growth and the referral agreement we have with Credit Suisse due to a partnership arrangement.  Moneyweb
  • The yield on SA’s R186 bond, which matures in December 2026, declined 6 basis points (bps) on Monday to close at 8.76%, equalling the level on August 25, the lowest close since August 17. 
    • On the back of a stronger Rand, SA’s benchmark bond yields fell to multiweek lows.
    • Market concern that a possible recession in the US and Europe might further upend a struggling local economy appeared to outweigh fears of accelerating global inflation, which is making central banks increasingly hawkish. Business day


  • In trading on Monday, the Dow added 0.71%, the S&P 500 climbed 1.06% and the tech-heavy Nasdaq jumped 1.27%.
    • All three major markets rallied for the 4th straight session as speculations for peak inflation sparked a risk rally.
    • However some analysts pushed back that recent gains could just be another bear market bounce.
  • This morning US stock futures edged higher as investors looked ahead to the August CPI report due for release later in the global day.
    • Traders focussing on the number as it will be one of the last pieces of data the Fed will assess before their Sept. 20-21 policy meeting.
    • Dow futures rose 0.1%, while S&P 500 and Nasdaq 100 futures each gained about 0.2%.
    • The August CPI data is expected to come in at 8.1% YOY , slowing for the second straight month following an 8.5% increase in July.


  • The US 10-year yield flat lined around 3.33%, as investors reassessed the outlook for monetary policy as the Fed seeks to rein in soaring inflation by hiking interest rates further even as growth slows.
    • While the US economy is slowing and some industries such as housing show signs of weakness, the labour market has remained robust and quieted fears of a recession.
    • Markets have upped their bets and 75 basis-point interest rate hike in September looks like a certainty.


  • The German 10-year yield held close to 1.7%, not far from an over 8-year high of 1.75% touched in June.
    • Reuters reported that ECB officials see a growing risk that they will have to raise their key interest rate to 2% or more despite a likely recession.
    • Meanwhile, the central bank sharply raised its inflation projections to an average of 8.1% this year and 5.5% in 2023.
    • Earlier, ECB President Lagarde stated that inflation expectations consistently above target warrant extra monitoring.


  • The Dow gained 229 to close at 32,381
  • The SP500 gained 43 points to close at 4,110
  • The Nasdaq gained 154 to close at 12,266


  • Asian Markets all higher on the back of a positive close on Wall Street.
    • In Japan, the Nikkei 225 rose 0.25% to close at 28,615 after tracking an overnight rally on Wall Street.
      • Meanwhile, markets remained cautious ahead of US CPI data that could influence the Federal Reserve’s tightening plans and the trajectory of global growth.
      • Investors also assessed data showing Japan’s producer prices increased steadily in August, while business sentiment improved in the third quarter.
    • In Australia, the ASX 200 rose 0.65% to close at 7,010 on Tuesday, rising for the 4th straight session and erasing losses from earlier this month.
      • Sentiment was also lifted by data showing Australia’s consumer sentiment rose for the first time since November 2021 .
      • Meanwhile, investors remained cautious ahead of US inflation data that could influence the Federal Reserve’s tightening plans and the trajectory of global growth.  Reuters
  • Brent crude oil futures fell toward $93/bl on Tuesday to snap a 3-day winning streak.
    • Traders citing caution ahead of US inflation data that could influence the Federal Reserve’s tightening plans and the trajectory of global growth.
    • Demand concerns driven by top crude importer China’s anti-virus restrictions and a deepening energy crisis in Europe also added to the bearish view.
    • However, Brent prices rallied about 7% in the past three days and rebounded from over seven-month lows
    • A weaker dollar highly supportive as investors await OPEC’s monthly report on its near-term market outlook due for release later on Tuesday. Gulf energy news
  • Gold prices steady at $1,720/oz after being rejected around the $1,735 level in the previous session.
    • Traders waiting for the US inflation report, the last ahead of the Federal Reserve’s Sept. 20-21 policy meeting.
    • The headline inflation rate in the US is expected to slow on an annual basis from 8.5% in July to 8.1% in August.
    • Speculations that inflation has already peaked supported gold prices in recent sessions as it also raises expectations for less aggressive Fed hikes after the September meeting. Kitco metals
  • The US dollar steadied around 108.2 in subdued trade on Tuesday, as investors prepared for US CPI.
    • The report to shed more light on how aggressive the Federal Reserve will need to be in raising interest rates moving forward.
    • The headline inflation rate in the US is expected to slow on an annual basis from 8.5% in July to 8.1% in August, and a surprise on either side would likely drive further currency volatility.
    • However, the US dollar lost nearly 2% in the past four sessions amid speculations that inflation has already peaked, sparking a rally in risk assets while pressuring the greenback.
    • Hawkish remarks from European Central Bank officials saying that rates would need to increase further if high inflation persists also weighed on the dollar. FX news

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