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Morning NOTE

14 June 2023


The ZAR found some resistance beyond the 18.5000 level, even after US CPI printed lower than expected.


The Rand traded beyond 18.5000/$ before losing ground to open at 18.6500 in early Johannesburg trading.

  • The local unit continued to strengthen into the US CPI data release.
    • Much of the movement appears to have been priced in, with the ZAR not showing any reaction after US CPI surprised to the downside.
      • Us inflation cooled for the month of MAY 2023.
    • US CPI declined to 4.0 percent in May 2023, the lowest since March 2021 and slightly below market expectations of 4.1 percent, driven by a decline in energy prices.
      • In addition, the core rate, which excludes volatile items such as food and energy, has slowed to 5.3 percent, the lowest since November 2021,
      • Traders citing, that the data likely supporting the argument for the Federal Reserve to consider pausing its current cycle of monetary tightening. 
  • Surprisingly, US Bond yields did not follow, the pausing narrative and the 10YT yield rebounded to trade above 3.80%
    • Once again indicating the level of uncertainty that surrounds tonight’s all important FOMC rate decision.
  • RISK *** Markets are priced  for NO RATE HIKE, which leaves the risk to the upside, if the Fed decides to hike again.

The news story continues around the AGOA conference scheduled for South Africa.

  • Prominent US lawmakers have called on US Sec of State, Anthony Blinken to move the summit as it disputes SA ”neutral“ stance on the Russian-Ukrainian war.
  • Markets paying close attention to the announcement after latest figures shows SA concluded nearly R60bn of trade with the USA.
  • Losing its AGOA status could have serious ramifications for the SA economy.
  • Members of the Biden administration have also expressed their concerns to Pretoria.

Markets this morning

  • USDZAR 18.6000
  • DOLLAR 103.33
  • EURUSD 1.0786
  • SP500 4,367
  • GOLD  1946
  • US10YT 3.82%

The week ahead

  • Event risk dominated by the US FED’s FOMC interest rate decision,
    • retail sales, and the Michigan consumer sentiment.
  • Investors will closely follow the ECB  and BOJ  monetary policy meetings.

Data This week


  • 08H00 : UK GDP  0.2%   MOM  EXPECTED -0.3% F/CAST


  • 14H15 : ECB RATE DECISION  +25BPS  ( 3.75% PREVIOUS TO  4.00% F/CAST)
  • 14H30 : US RETAIL SALES  -0.1% MOM VS +0.4% PREVIOUS



Market Movement Today:

The Rand rally paused after the local unit found some resistance around the 18.5000/$ level.

  • After the lower than expected US CPI, the ZAR retraced some of it large gains as traders preferred to take profit ahead of tonight’s FOMC meeting.
  • This morning the local unit again finding support and exporters driving prices lower in early trading.
  • We opening at 18.6000
  • US CPI  printing lower than expected at 4.00% vs 4.9% previously but CORE CPI spiked to 5.3%.
    • The news surprisingly sending treasury yields higher.
    • The US 10YT at 3.82% ahead of tonight’s Fed announcement.
    • Much of the markets have priced for a “NO HIKE “by the FED;
    • Which leaves the  RISK for a sharp move if the FED does hike

The ZAR continues to benefit from the Risk on environment, however don’t expect large moves either side ahead of tonight’s FOMC

RISK to the local unit remains AGOA

  • The letters from the US lawmakers, to the Biden administration, to move the summit form South Africa as well as,
    • the threats of SA losing its AGOA  status a concern for business leaders.
  • Recent data indicating SA had concluded nearly R60bn of trade with the USA , 2nd only to China.

Markets this morning

  • USDZAR 18.6000
  • DOLLAR 103.33
  • EURUSD 1.0786
  • SP500 4,367
  • GOLD  1946
  • US10YT 3.82%
  • Trade : CUT DOLLAR SHORTS – (markets remain oversold, ahead of FOMC tonight).

Expected Ranges:

  • USDZAR : Expect a range 18.5500-18.7000
    • Importers : 18.6000-18.5500
    • Exporters : 18.6500-18.7000
  • EURZAR : Expect a range of 19.9900-20.1700
    • Importers : 20.0500-19.9900
    • Exporters : 20.1100-20.1700
  • GBPZAR : Expect a range of 23.4500-23.3700
    • Importers : 23.4500-23.3700
    • Exporters : 23.5300-23.6100


  • USDZAR : 18.6200
  • EURZAR : 20.1000
  • GBPZAR : 23.5000



  • The National Assembly has passed the contentious National Health Insurance (NHI) Bill paving the way for universal healthcare.
    • While the bill faced opposition from several parties, it passed with 125 voting against the bill and 205 voting in favour of it.
    • This now brings it a step closer to being signed into law.
    • The National Health Insurance will cover all South Africans, employed or unemployed no matter their income. EWN


  • A group of both US Democratic and Republican legislators have asked the White House to move this year’s African Growth and Opportunity Act (AGOA) summit away from South Africa.
  • In addition, they warned that the country looks set to lose its AGOA status.
    • AGOA gives duty-free access to 25% of South African exports to the US, SA’s second-biggest single-country trading partner after China.
    • The group of legislators –
      • is accusing South Africa of deepening its military relationship with Russia over the past year.
        • “Late last year, a Russian cargo vessel subject to US sanctions docked in South Africa’s largest naval port,
          • and intelligence suggests that the South African government used this opportunity to covertly supply Russia with arms and ammunition that could be used in its illegal war in Ukraine.” NEWS 24

Standard Bank grilled on fossil fuel funding

  • Activist shareholders of Standard Bank put its board in the firing line at the company’s annual general meeting (AGM), over the lender’s decision to continue financing oil and gas projects.
    • In defence, its group chairman, Nonkululeko Nyembezi, said the bank will continue to fund gas and oil projects in the short- to medium term, adding that its concern is growth on the African continent.
    • One of its latest transactions, which remains subject to conditions, is debt financing of $250 million to JSE-listed Renergen,
      • which recently began construction on the second phase of its gas project in Virginia in the Free State. Moneyweb



  • US stock futures fell on Wednesday after Wall Street overnight posted a fourth consecutive day of gains
    • Traders citing bets that the Fed could hold its key lending rate steady later in the day after official data showed consumer inflation cooled more than expected in May.
    • Market participants also preparing for Chair Powell’s remarks to the media, where he may offer insight about the economy and the central bank’s path forward.
    • On the corporate front, US-listed shares of Chinese companies rose after China’s central bank lowered its short-term lending rate for the first time since August 2022.


  • The yield on the US 10-year Treasury note rebounded to approximately 3.8% after hitting a session low of 3.682% on Tuesday.
    • Investors analysed the US inflation data, which further strengthened the belief that the FED might opt to refrain from raising interest rates at the conclusion of its two-day meeting on Wednesday.
    • The CPI report revealed that headline inflation in May decelerated more than anticipated, reaching 4.0%, while the core gauge met expectations at 5.3%.
    • Elsewhere, central banks in the Eurozone and United Kingdom are expected to continue their rate-hiking strategies in the coming months, reflecting their efforts to address inflationary pressures.


  • DOW +145 TO 34,212
  • SP500 +30 TO 4,369
  • NASDAQ  + 111 TO 13,573

  image: Trading economics


The US dollar

  • The dollar index was subdued around 103.2 on Wednesday after losing about 0.3% in the previous session.
  • The Buck lower as softer-than-expected US inflation data bolstered bets that the Federal Reserve will pause its aggressive tightening cycle this month.
    • The US inflation rate fell to 4% in May from 4.9% in April, the lowest in over two years and below market expectations of 4.1%.
      • Still, markets remain divided on whether the US central bank would hold rates steady or resume its policy tightening in July.
    • Externally, investors also braced for monetary policy decisions from the European Central Bank and the Bank of Japan.
      • The ECB is widely expected to raise its policy rate by 25 basis points this week and again in July to combat sticky inflation.
    • On the other hand, the BOJ is anticipated to maintain its ultra-loose monetary policy this week as continued economic recovery was countered by slowing global growth. FX news

Asian markets

  • In Japan, the Nikkei 225 gained 347 points or 1% to 33,365.  
    • The index gaining for the fourth session in a row and touching its highest level since 1990, buoyed by a strong session on Wall Street.
    • The slowdown in US inflation in May supported the case for the Fed to pause their tightening campaign later today.
      • Traders were also eager to enter new positions, amid speculation that China may cut interest rates even further this year,
        • while Beijing reportedly is considering a broad package of stimulus measures to aid the economy.
    • At home, an official survey showed that an improving service sector in Japan has pushed a business-mood gauge among major companies into positive territory.
      • Nearly all major sectors contributed to the rally, with consumer cyclicals, basic materials, and financials being early movers.

Crude oil

  • US WTI crude futures recovered back to $69 /bl and Brent crude futures steadied above $74 per barrel on Wednesday
    • Traders avoided making big bets ahead of the US Federal Reserve’s monetary policy decision.
    • The US oil benchmark gained more than 3% on Tuesday on hopes for stronger demand after China’s central bank lowered a short-term lending rate,
      • while cooler-than-expected US inflation supported bets for a pause in the Fed’s interest rate hikes.
      • Oil prices also remain under pressure from rising global supply after OPEC+ granted Russia a slightly higher oil production baseline,
        • allowing it more output under the latest quotas than previously agreed. Gulf Energy news


  • Gold declined after US rates spike once again below $1,950 an ounce on Wednesday.
    • Bullion holding its recent decline as caution dominated sentiment ahead of the US Federal Reserve’s monetary policy decision.
      • The Fed is widely expected to pause its aggressive tightening cycle on Wednesday after data showed that US inflation cooled more than expected in May.
      • Still, markets remain cautious as Fed Chair Jerome Powell could issue a hawkish forward guidance after the announcement due to upside risks to inflation.
    • The BOJ is also expected to maintain its ultra-loose monetary policy on Friday,
      • ` while the ECB is widely anticipated to raise its policy rate by 25 basis points this week and again in July to combat sticky inflation.
      • Earlier this month, both the Reserve Bank of Australia and the Bank of Canada surprised markets by raising interest rates further,
      • sparking fears that other major central banks could follow suit. Kitco metals report

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