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GOOD MORNING
The ZAR gained 2.81% after Parliament voted against the motion to impeach President Cyril Ramaphosa.
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SUMMARY
- The Rand gained sharply to reach 17.2500 in late Tuesday trading following an aggressive sell-off early in the session with 17.7500 trading.
- The initial sell-off ahead of the SA parliament’s sitting to impeach Ramaphosa,
- But was swiftly reversed following a victory for CR as Parliament failed to reach to majority to move forward with proceedings.
- The ANC almost unanimously backing CR with only a few dissenters lead by Ndlamini-Zuma.
- What a a difference 24 hours can make.
- During the proceedings, the much anticipated US CPI report was released.
- US CPI printing lower than expected at 7.1% vs 7.7% previous and 7.3% expected.
- Markets and Risk assets rallied sharply on the news, as it confirmed the view that inflation had peaked and that the Fed will embark on a much anticipated “ slow-down”.
- The potential for a pause in 2023 also on the cards.
- The SP500 at one stage reaching 4100 before falling back and the 10YT yield also faling to 3.45% as expectations for a dovish Fed increased.
- The Dollar also retreating sharply to break below 104, as the Euro traded above 1.0600.
- Markets now focussed on tonight’s final FOMC RATE DECISION AT 9PM
- Expected is +50bps.
- However, the language from the FED as well as Press Conference by Jerome Powell , likely to grab all the attention as he spells on the future of rates.
- NB: We also have SA inflation at 10h00, but not much is expected in terms of market movements especially with the Fed tonight.
- Earlier, this morning, U.K. inflation came in slightly below expectations at 10.7% in November, as cooling fuel prices helped ease price pressures.
- Economists polled by Reuters had projected an annual increase in the consumer price index of 10.9%, after October saw an unexpected climb to a 41-year high of 11.1%.
- This likely to add to a dovish BOE on Thursday.
Significant Market Data:
Wednesday
- 10H00 : SA INFLATION YOY NOVEMBER 7.4% EXPECTED VS 7.6% PREVIOUS
- 10H00 : SA CORE INFLATION YOY NOVEMBER 5.1% EXPECTED VS 5% PREVIOUS
- 13H00 : SA RETAIL SALES -0.4% YOY OCTOBER VS -0.6% PREVIOUS
- 21H00 : US FED FOMC INTEREEST RATE DECSION +50 BPS EXPECTED ( Fed funds moves from 4% to 4.50% )
- 21H00 : US FED CHAIR : JEROME POWELL Q&A , WILL PAVE WAY FOR FUTURE RATE PATH AND PROJECTIONS.
Thursday
- 11H30 : SA PPI NOVEMBER YOY 15.7% EXPECTED VS 16% PREVIOUS
- 15H15 : ECB INTEREST RATE DECISION +50 BPS EXPECTED : LENDING RATE FROM 1.5% TO 2%
- 15H30: US RETAIL SALES -0.2% EXPECTED VS 1.3% PREVIOUS
TODAY
- The Rand reached 17.2200 BEFORE reversing this morning as traders book profits ahead of tonight’s FOMC.
- ZAR gains following the vote against the impeachment of President Ramaphosa,
- As well as lower than expected US CPI data.
- However, Markets firmly focussed on the FED tonight with 50 bps expected and Jerome Powell’s speech (21h00 CAT)
- All of this points to a Risk on Environment , with the only concern the ANC’s leadership conference on the weekend.
- However, with inflation likely to have peaked, expect a stronger session for Risk assets like the ZAR.
- In addition, we continue to expect a stronger ZAR heading into the final days of 2022 as well as the Q1 of 2023.
- This morning we seeing some early profit taking as traders book profits.
- Expect a USDZAR rally above 17.3000 towards 17.3700 and this will likely present good opportunities for Exporters.
RISK EVENT : US FED FOMC AND PRESS CONFERENCE.
TRADE : SELL USDZAR ON RALLIES
Expected Ranges
- USDZAR : Expect a range 17.1300-17.3700
- Importers 17.2100-17.1300
- Exporters 17.2900-17.3700
- EURZAR : Expect a range of 18.1900-18.4900
- Importers 18.2900-18.1900
- Exporters 18.3900-18.4900
- GBPZAR : Expect a range of 21.1600-21.4600
- Importers 21.2600-21.1600
- Exporters 21.3600-21.4600
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OPENING RATES
- USDZAR 17.2500
- EURZAR 18.3400
- GBPZAR 21.3200
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SOUTH AFRICA
- The National Assembly voted against a motion to impeach President Cyril Ramaphosa.
- An independent panel recommended that Parliament continued with impeachment proceedings.
- However, not enough ANC MPs broke ranks to vote with the opposition for the motion to pass.
- The ATM’s motion was defeated by 214 votes to 148, with two abstentions.
- This comes four days before the ANC’s national conference.
- After this vote, Ramaphosa is contesting to remain the party’s president, with disgraced former health minister Zweli Mkhize his biggest challenger. News24
- Also, the businessman at the centre of the Phala Phala scandal reportedly said he was willing to testify in any legal proceedings.
- Dubai-based Hazim Mustafa was named in a report probing allegations of a cover-up.
- This after more than $500 000 was stolen from President Cyril Ramaphosa’s Phala Phala farm in February 2020. EWN
- Dlamini Zuma defended her move to vote in favour of Ramaphosa impeachment proceedings
- She was one of four ANC MPs who refused to toe the party line.
- Thus supporting the call for the adoption of the Section 89 panel report which found that Ramaphosa had a case to answer. EWN
ESKOM
- The City of Johannesburg’s request for a three-day load shedding exemption is under review, according to Eskom.
- “Eskom can confirm that City Power has made a request for exclusion from load shedding. The request is currently being reviewed,” it said on Tuesday.
- Johannesburg Mayor Mpho Phalatse submitted the urgent request to the power utility on Monday,
- as City Power officials battled to clear an increasing backlog of faults and power outages that occurred during torrential rains in Gauteng.
- Eskom tariff hike of more than 20% is unlikely, according to energy analysts.
- South Africans could face another cost-of-living shock when Nersa announces next year’s ‘draft’ electricity tariff increase. IOL NEWS
GLOBAL MARKETS
Stocks:
- US stock futures were little changed on Wednesday as investors were on a wait and see mode ahead of the Federal Reserve’s interest rate decision.
- In regular trading on Tuesday, the Dow rose 0.3%, the S&P 500 gained 0.73% and the Nasdaq Composite climbed 1.01%, with ten out of 11 S&P sectors finishing in positive territory.
- Those gains came on the heels of softer-than-expected US inflation data.
- The lower than expected CPI, giving rise to hopes that the central bank could pause or shift policy in the coming months.
- A Bureau of Labor Statistics report showed that the annual inflation rate eased to 7.1% in November, below economists’ forecasts of 7.3%.
- The data reinforcing the case for a modest 50 bps hike on Wednesday.
Bonds:
- The yield on the US 10-year retreated below the 3.5% mark.
- The yield approaching the three-month low of 3.4% touched on December 7th after the domestic inflation report surprised to the downside.
- It was, easing expectations of how high the Federal Reserve will have to raise its funds rate target.
- Consumer prices rose by 7.1% annually in November, below estimates of 7.3% and easing from 7.7% in the prior month.
- The result consolidated hopes of slowing price growth as data, adding to bets that the FOMC will deliver a 50bps rate hike this week
- and maintain smaller rate hike increments as we enter 2023.
YESTERDAY
- The Dow 103 to 34,108
- The SP500 29 to 4,019
- The Nasdaq 113 to 11,256
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 Image: Trading Economics
OVERNIGHT HEADLINES
Asian markets higher across the region after lower than expected US CPI and the Fed’s final FOMC meeting tonight.
- In Japan, the Nikkei 225 jumped 0.72% to close at 28,156 and in turn rising for the second straight session and tracking gains on Wall Street overnight.
- Stocks higher across the board, following the release of softer-than-expected US inflation data.
- But traders remain cautious ahead of the Federal Reserve’s policy decision.
- In Australia, the ASX 200 climbed 0.67% to close at 7,251, rising for the second straight session and tracking gains on Wall Street overnight.
- This after lower than expected US CPI.
- Technology stocks led the charge, with strong gains from Block Inc (8.2%), Xero (3%).
- Energy firms and gold stocks also advanced on higher oil and gold prices, including Woodside Energy (1.5%). Reuters
- The US dollar DECLINED across the board after the lower than expected US CPI.
- Investors now turning their focus rather cautiously towards the Federal Reserve’s interest rate decision.
- The Fed is expected to moderate its aggressive tightening campaign but point to a higher peak for rates.
- Traders will be closely monitoring Fed Chair Jerome Powell’s press conference after the policy announcement for guidance on futures rate hikes.
- Investors also remain cautious as other major central banks look to hike rates including the
- European Central Bank,
- Bank of England and
- Swiss National Bank…. Reuters
- Brent crude futures eased toward $80 per barrel on Wednesday after rallying about 6% in the past two sessions.
- Traders now await the Fed’s interest rate decision, 50 bps are expected and possibly a slowdown in 2023.
- An industry report also showed that US crude inventories unexpectedly jumped by 7.82 million barrels last week,
- the highest weekly build since March and compared with market expectations for a 3.91 million barrel decline.
- On the supply side, OPEC reduced estimates for the amount of crude the group will need to pump in the coming months due to macroeconomic headwinds. Gulf energy news
- Gold steadied above $1,800/oz as investors stayed on the side-lines ahead of the US Federal Reserve’s interest rate decision.
- The modest rise in US CPI BELOW expectations also supporting the yellow metals .
- Other major central banks including the European Central Bank, Bank of England and Swiss National Bank are also scheduled to decide on monetary policy this week.
- But, Bullion surged nearly 2% on Tuesday to reach its highest levels in over five months following the US CPI. KITCO METALS
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