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Morning NOTE

15 June 2023


The ZAR continued its advance and traded to R18.2500/$ before reversing some of the gains after the FED’s decision to hold rates steady.


The Rand’s remarkable advance continued reaching levels not seen, since before the Lady-R fiasco.

  • The local unit advancing to R18.25/$ on the back of a soft PPI data, that followed in the previous day’s CPI data.
  • Chairman Jerome Powell in his press conference address the “sticky”  PCE Core inflation that remains stubbornly above 4% as well as Core Cpi that also remains above 5%.
    • The committee, felt the pause would give them an opportunity to assess the impact of previous hikes, but he stressed on more rate hikes to come.
    • In addition Powell stated that the US economy is strong enough to withstand more rate hikes.
  • The Fed left the target for the fed funds rate unchanged at 5%-5.25%
    • The FOMC signalled rates may go to 5.6% by year-end if the economy and inflation do not slow down more.
    • It is the first pause in the tightening campaign following ten consecutive hikes that lifted borrowing costs by 500bps to the highest level since September 2007.
  • Bond yields remained elevated as the 10YT once again at 3.83%.
    • The dollar also recovering to once again trade at 103.30 after briefly crashing to 102.80 after the release of the PPI data.
    • The central bank’s dot plot indicated a median expectation for the funds rate to reach 5.6% by the end of 2023 as inflationary pressures persist.
    • The dollar gained the most against the Japanese yen as the Bank of Japan is expected to maintain its ultra-easy policy on Friday.
  • The ZAR reversing its large gains of R1.65 or 8.29% since hitting an all time low of R19.90/$ 2 week ago.
    • Expect some profit taking ahead of the “double” long weekend .
      • Friday SA holiday – June 16th
      • Monday US holiday – June 19th

Data This week

  • 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 continued with the local unit trading at strong as 18.2500 on Wednesday.

  • The local unit gaining more traction after US PPI printed lower than expected and the Fed “paused” with a hawkish statement.
  • Risk assets initially sold off before rebounding in early trading.
  • The Dollar after yields spiked, with largest gains for the Buck vs the YEN.
  • The ZAR continues to attract “investors with an appetite for high yielding risk assets.
    • This morning the local unit once again trading stronger as traders look for direction.
    • SA 10YGB AT 10.73%
  • Elsewhere,
  • The Euro also “BID” vs the Dollar, as markets expect the ECB to remain vigilant in its fight against inflation
    • Markets and investors are eagerly awaiting the ECB’ policy decision and subsequent press conference later today.
    • Eurozone policymakers are expected to implement another 25 basis points rate hike in response to persistent inflationary pressures.
    • The Eurozone is currently facing a mild recession,
    • with both consumer and producer inflation rates decelerating more than initially anticipated, while the labour market has remained tight.
  • With the Euro well bid above 1.0800, expect the sentiment to drift into the ZAR and we expect a stronger ZAR.
  • RISK to the local unit remains AGOA and SA’s expulsion, especially after the US state department sanction an SA Aviation school in Oudshoorn
    • The charge : “… the school trains Chinese military fighter pilots”.
    • The government stance with Russia continues to place a cloud over SA’s head and this remains the biggest risk to the local unit.

Markets this morning

  • USDZAR 18.3500
  • DOLLAR 103.33
  • EURUSD 1.0807
  • SP500 4,367
  • GOLD  1929
  • US10YT 3.82%
  • Trade :  BUY ZAR

Expected Ranges:

  • USDZAR : Expect a range 18.1500-18.5700
    • Importers : 18.2900-18.1500
    • Exporters : 18.4300-18.5700
  • EURZAR : Expect a range of 19.7200-20.0200
    • Importers : 19.8200-19.7200
    • Exporters : 19.9200-19.7200
  • GBPZAR : Expect a range of 23.0600-23.4200
    • Importers : 23.1800-23.0600
    • Exporters : 23.3000-23.4200


  • USDZAR : 18.3500
  • EURZAR : 19.8500
  • GBPZAR : 23.2600


Lady R

  • Defence Minister Thandi Modise said there’s no need for a judicial inquiry to tell them what they already know about the docking of Russia’s Lady R vessel.
    • She reiterated that no arms were loaded onto the vessel in December but did confirm that the South African Defence Force received a consignment from Russia from an old 2018 order.
      • But some opposition members of Parliament (MPs) raised questions about Modise’s latest response, accusing her of changing her story.
    • Modise was responding to questions from MPs as part of the peace and security cluster on Wednesday – where she was, once again, grilled about the docking of the Russian vessel. EWN


  • The City of Cape Town said that heavy rainfall over the past 24 hours has caused the Jakkalsvlei Canal, the Lourens River and the Keyser River to burst their banks.
    • Heavy rains have been pummelling Cape suburbs since Tuesday, with more cold and wet weather expected over the next few days.
  • The city’s Disaster Risk Management’s Charlotte Powell: “The city officials and Eskom are working together to restore power in the Helderberg area.
    • Kay’s Caravan Park in Strand is being evacuated and a local NGO is accommodating residents.
    • A number of informal settlements in Philippi, Strand,have been flooded.
    • Several roadways have also been affected by temporary storm-water overflows, uprooted trees and mud on the road surface.” EWN

US sanctions

  • Oudtshoorn-based Test Flying Academy of SA has appeared on a sanctions list for “activities contrary to the national security or foreign policy interests of the United States”.
    • The US is upset that it trains Chinese fighter pilots, with the help of former American and European fighter pilots.
    • The company says it was not consulted, has broken no laws, and has been operating openly for a decade.
    • The UK issued a “threat alert” about TFASA last year, and political rhetoric quickly ramped up.
    • The company apparently came to the attention of American authorities after the United Kingdom;
      • issued a “threat alert” naming it in October, leading to a flurry of investigations as far afield as Australia,
        • and accusations up to and including facilitating treason. 



  • On Wednesday, the Dow fell 0.68%, while the S&P 500 and Nasdaq Composite gained 0.08% and 0.39%, respectively.
    • `Seven out of the 11 S&P sectors finished lower, led to the downside by energy, healthcare and materials, while technology stocks outperformed.
  • US stock futures steadied on Thursday after the Federal Reserve kept rates unchanged for the first time since March 2022.
    • BUT the FOMC indicated that further policy tightening may be needed later this year.
  • Futures contracts tied to the three major indexes drifted flat to slightly positive.
  • The Fed’s post-meeting statement said that holding rates steady allows it to assess additional information and its implications for monetary policy, while hinting at two more rate increases by the end of 2023.
    • Fed Chair Jerome Powell also said that no decision for July has been made yet and the conditions needed to get inflation down are coming into place.


  • The yield on the US 10-year Treasury note was above 3.8%, approaching high levels not seen in three months, amid hawkish signals from the Federal Reserve.
  • The Fed kept interest rates steady in June, in line with expectations but warned further tightening would be necessary.
  • Median forecasts from FOMC members point to a terminal rate of 5.6%, which implies two additional 25bps rate hikes this year before an eventual dovish pivot next year.
  • Traders are currently betting the next rate hike will happen as soon as July although Fed Chair Powell said no decision for the next meeting has been made yet.


  • DOW -232 to 33,979
  • SP500 +3.5 to 4,372
  • NASDAQ +53 to 13,626

  image: Trading economics


The US dollar

  • The US dollar strengthened to 103.30 on Thursday after facing pressure in recent sessions.
    • The Federal Reserve held off on a rate hike, but hinted at two more quarter-point rate increases by the end of the year.
      • The Fed kept its benchmark interest rate within a range of 5.00% to 5.25% at its June policy meeting,
        • saying that holding rates steady allows it to assess additional information and its implications for monetary policy.
      • However, the central bank’s dot plot indicated a median expectation for the funds rate to reach 5.6% by the end of 2023 as inflationary pressures persist.
    • The dollar gained the most against the Japanese yen as the Bank of Japan is expected to maintain its ultra-easy policy on Friday.
    • The greenback also appreciated sharply against the yuan and the kiwi as latest data pointed to a weakening economy in China and New Zealand. FX news

Asian markets

In Japan, the Nikkei 225 Index inched down 0.05% to close at 33,485, reversing gains from earlier in the session and snapping a four-day advance.

  • Investors booked some profits following a strong rally that brought the benchmark indexes to over three-decade highs.
  • Markets also turned cautious after the US Federal Reserve decided to keep rates unchanged but hinted at further rate hikes later this year.
  • Meanwhile, investors reacted to data showing Japanese exports surprisingly expanded in May and private capital investment rose more than expected in April.

In China, the Shanghai Composite jumped 0.74% to close at 3,253 after the People’s Bank of China lowered its one-year medium-term lending facility rate by 10 basis points to 2.65%, the first such cut in ten months.

  • This came just two days after the central bank slashed its seven-day reverse repurchase rate by 10 basis points to 1.9%, as a decelerating economic recovery prompted government support.
  • Investors also assessed a slew of Chinese economic reports including industrial production, retail sales, unemployment and fixed asset investment data. Reuters

Crude oil

  • US WTI crude futures steadied above $68 per barrel on Thursday as traders assessed the impact of China’s interest rate cuts and the US Federal Reserve’s hawkish pause on demand.
    • China’s central bank has now lowered two key lending rates this month for the first time in nearly a year to support the economic recovery, prompting markets to reassess the demand outlook in the world’s top crude importer.
    • The US Fed also held off on a rate hike at its June meeting while hinting at two more quarter-point rate increases by the end of the year.
    • The IEA said in its monthly report that global oil demand will rise by 6% between 2022 and 2028.
    • Meanwhile, official data showed that US crude inventories surged by 7.919 million barrels last week, the most in 17 weeks and compared with market expectations of a 0.51 million draw.
    • Gasoline and distillate stockpiles also increased more than expected. Gulf energy news


  • Gold fell toward $1,930 an ounce on Thursday, sliding to its lowest level in three months.
    • Bullion lower after the dollar rebounded after the US Federal Reserve paused its tightening campaign, but hinted at further interest rate hikes this year.
    • The Fed kept its benchmark interest rate within a range of 5.00% to 5.25% at its June policy meeting, saying that holding rates steady allows it to assess additional information before moving forward.
    • However, the central bank’s projections indicated that borrowing costs will likely rise by another half-percentage point by the end of 2023 amid a resilient economy and as inflationary pressures persist.
    • The European Central Bank and the Bank of England are also expected to tighten policy further, while the Bank of Japan is set to retain massive stimulus. Kitco metals

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