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Morning NOTE

14 September 2022


The ZAR weakened on the back of a higher than expected US CPI print for August.


  • The Rand  lost 2.6% in a rapid sell-off following the release of the US CPI report.

    • US inflation surprising markets to the topside, as rate hike fears set in and Risk assets took a hammering.
      • US Stock markets losing between 4 and 5% as investors headed for cover.
      • The Dow Jones losing 1,276 points, while the benchmark SP500 declined 4.32% and the Nasdaq 5.16%
  • After the CPI data, the US FOMC is widely expected to deliver its third straight 75 basis point rate hike at the September 20-21 policy meeting.
    • In addition, the US 10YT yields spiked to almost reach a 10year high of 3.5%.
      • The result a spike in the US dollar as it broke through the 110 index level.
      • The Buck leaving everything in its wake as the Euro, Pound, Yen and the ZAR + EMFX all fell victim to the mighty Greenback.
    • However alarmingly, Fed funds futures point to an over 30% likelihood of a more aggressive 100 basis point increase.

Significant Market Data


  • 14H30 :  US PPI 8.8 % YOY VS 9.8% PREVIOUS

*** For a stronger ZAR: markets require a Higher SA Retail Sales number and a Lower US PPI number.

Reason : Higher retails SALES will give the SARB confidence to match the FED, and lower PPI could ensure talk of 100 bps disappear.

Right now the latter pose a serious risk to financial markets .


  • 20h00 : 21 September  2022  US FOMC  +75bps expected
  • 15h00 : 22 September 2022  SARB  +50bps expected


  • This morning we are facing a completely different landscape to the one that faced us 24 hours ago.
    • Yesterday, the market expected a softer inflation number, illustrated by sharp ZAR gains as we briefly traded below the R17/$ handle.
    • At 14h30 yesterday, this all changed following a hotter than expected CPI release.
    • The ZAR losing nearly 30 cents in seconds as algo’s exited the RISK TRADE at break neck speed.
    • The local unit once again showing its vulnerability to international capital flows.

The severe shift in sentiment post CPI , leads me to believe we can expect a weaker ZAR.

  • A break of yesterday’s high of 17.4800, opens up 17.5300- 17.6000 for the session.
  • ** markets will once again watch data closely today .
  • Trade : BUY USDZAR ON DIPS OR A BREAK OF 17.5000

Expected Ranges

  • USDZAR :  Expect a range 17.3300-17.5300
    • Importers 17.3900-17.3300
    • Exporters 17.4600-17.5300
  • EURZAR :  Expect a range of 17.2300-17.5400
    • Importers 17.3300-17.2300
    • Exporters 17.4300-17.5400
  • GBPZAR :  Expect a range of 19.8700-20.2100
    • Importers 19.9800-19.8700
    • Exporters  20.1000-20.2100


  • USDZAR 17.4200
  • EURZAR 17.3800
  • GBPZAR 20.0400


  • Eskom chief operating officer Jan Oberholzer on Monday disclosed that a full 42 generating units have broken down since early the previous week – some more than once.
    • He admitted that the work done by Eskom and its contractors’ maintenance team is not up to standard and units frequently break down shortly after undergoing maintenance.
      • Oberholzer ascribed this to a lack of skills.
    • As a result, the struggling utility used its emergency reserves – diesel-driven open-cycle gas turbines and pump storage schemes, to try to keep the lights on. MoneyWeb
  • The National Union of Metalworkers of South Africa (Numsa) on Tuesday evening said it reached a settlement agreement that was signed with bus company Putco following an intense wage strike by bus drivers.
    • The settlement includes among others implementation of a 6% wage increase on 1 October 2022.
    • It will be for all employees who were employed from 1 April 2020. EWN
  •  President Cyril Ramaphosa, objected to the ruling in the Western Cape High Court, that upheld Public Protector Busisiwe Mkhwebane’s challenge to her suspension.
    • A full bench comprising three judges on Friday declared Ramaphosa’s decision to suspend Mkwhebane invalid and set it aside.
      • While her suspension was against the backdrop of the impeachment proceedings that were before Parliament,
      • The court found that it was improper as it came days after she had sent the president questions on the Phala Phala saga. IOL
  • Massmart, subject to a full buyout offer from parent Walmart Inc, has begun shutting unprofitable and unviable Game stores across the country.
    • In December 2021, it announced that it had identified an “initial” “15 stores that will be subject to a possible sale”.
    • This followed the re-lay of all 114 Game stores in the country which allowed the retailer to compare sales trends and potential. News24


  • US stocks fell sharply on Tuesday, after a hotter-than-expected US inflation reading.
    • The CPI print boosted speculation that the Fed will have to move even more aggressively to tame runaway price growth.
    • At one point, the Dow plunged nearly 1300 points and the S&P 500 fell 4.3%, marking their worst sessions since June 2020.
      • The Nasdaq 100 declined 5.5% for its sharpest decline since March of 2020.
    • After the inflation release, markets continue to price for a 75bps rate hike and this is still broadly expected next week.
  • Declines were most pronounced in high-growth stocks as the prospect of higher interest rates triggered a rally in Treasury yields, denting appetite for such companies.


  • Bond yields rose across the globe on the back of a higher than expected US CPI print. The US inflation beating estimates to reach 8.3%
    • The US 10-year yield consolidated above 3.4%, approaching an over 10-year peak of 3.5% touched in June.
    • A hotter-than-expected CPI report reinforced market bets on more hikes.
  • The US annual inflation rate eased to 8.3% in August from 8.5% in July, less than markets have expected while the monthly figure went up 0.1%, against expectations of a 0.1% decrease.
  • The US central bank is widely expected to deliver its third straight 75 basis point rate hike at the September 20-21 policy meeting.
  • However alarmingly, Fed funds futures point to an over 30% likelihood of a more aggressive 100 basis point increase.
    • This supporting bets that the policy rate could reach 4.3% in early 2023.


  • The Dow fell 1276 to 31,104
  • The SP500 fell 177 to 3,932
  • The Nasdaq fell 632 to 11,633


  • Asian markets trading sharply lower, following the spike in US yields after the most recent inflation reading.
    • In Japan, the Nikkei 225 declined 2.78% to close at 27,819 after tracking sharp overnight losses on Wall Street.
      • The higher-than-expected US CPI for August triggered fears about more aggressive Fed rate hikes.
        • The hot US inflation report caught markets off guard as analysts were expecting prices to have at least levelled off and not climb higher.
          • Some bets were even in favour of much a bigger 100 basis point increase next week.
          • Meanwhile, sharp losses in the Japanese yen in the wake of strong US inflation numbers sparked further verbal intervention from authorities.
  • In Australia, the ASX 200 Index fell 2.58% to close at 6,829. Index dragged down by sharp declines on Wall Street, following the CPI release.  
    • Technology and financial stocks led the declines, as well as the heavyweight miners mining and energy stocks,
      • as well as growth-oriented healthcare, consumer and clean energy-related names also posted sharp losses. Bloomberg
  • US Crude oil were trading near $87/bl barrel, falling nearly $3/bl after a hotter-than-expected US inflation reading triggered a sell-off across all riskier assets.
    • The US continues to flood the market to keep a lid on prices and data showed, that emergency oil reserves in the US fell to the lowest level since October 1984.
      • This as the government set a plan in March to release 1 million barrels per day over six months to tackle high fuel prices.
    • On a brighter note, OPEC has stuck to its forecasts for global solid oil demand growth in 2022 and next year.
    • The cartel citing signs that developed economies remain resilient despite headwinds such as surging inflation. Gulf Energy News
  • Gold prices crashed through the $1700/oz level following the latest US CPI report.
    • The spike in US yields and a stronger dollar, after a hotter-than-expected inflation print pushed bets of more jumbo rate hikes by the Fed to curb persistent inflationary pressures.
    • In Europe, investors bet the ECB will continue to rise borrowing costs sharply after the central bank delivered a historic 75bps rate hike early this month.
    • In addition, US rates fully priced for 75 bps with some Fed fund futures also opening up a 30% probability of a 100bps hike in September. Kitco metals
  • The US dollar bounced sharply to approach 110 after the latest CPI report showed inflation eased less than expected in August.
    • The inflation print strengthening the case for the 3rd straight 75bps rate hike by the US central bank next week.
      • The US annual inflation rate eased to 8.3% in August from 8.5% in July.
      • This was however above market expectations of 8.1% while the core CPI also surprised to the upside with 6.3% .
    • The most pronounced selling activity was against the Japanese yen, which crossed again 144, the lowest since July 1998 AND
    • The Euro crossed parity AGAIN to trade at 0.9968, the pound was also approaching a 37-year low at 1.1491. FX news

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