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Morning NOTE

15 November 2022


The ZAR consolidated recent gains versus the Dollar to in a narrow range ahead of the US PPI release.


  • The Rand traded in a narrow range of 17.3700-17.2000, ahead of this week’s US PPI release.

  • The market continues to trade with a RISK ON BIAS after last week’s US CPI print.
  • Traders are now betting that the FED will only hike 50 bps in December and also slow down even further in 2023.
    • Adding to optimism was a report from Goldman Sachs, where the US investment bank expressed a view for lower inflation in 2023.
      • Bond yields continued to slide and the US Dollar remained under pressure.
  • The PPI data today becomes vitally important as it could either confirm (the CPI print) or throw more uncertainty at the market  i.e. RISK OFF).
  • Locally, the market waiting for SA retail sales on Wednesday to gain insight into the health of the SA consumer as we head into the Xmas spending period.
    • Analysts continue to look for a contraction and any surprised to the topside likely to be ZAR supportive.
    •  The ANC elective conference is fast approaching with the incumbent Cyril Ramaphosa facing opposition against his candidacy from the RET and Zuma factions.
    • In addition, noise continues to grow around the “step-aside rule” if CR is officially charged with criminal wrong doing in the Phala-Phala farm robbery scandal.
      • Markets will start paying attention to this as we head into December.
  • For now the SP500 approaching 4000, the Dollar under pressure and falling Global bond yields continues to provide support for the ZAR and the rest of the major EMFX complex.

Significant Market Data:


  • 15h30: US PPI 8.3% EXPECTED VS 8.5% PREVIOUSLY




  • The ZAR opening stronger on the back of positive Risk session in Asia.
  • Bond yields falling and a Dollar under pressure continues to provide support to the local unit.
  • An early morning opening with the ZAR testing the previous sessions low at 17.2000.
    • Price action Indicating an early morning STOP HUNT ahead of the European open (10h00 CAT).
    • Local banks taking advantage and we likely to see a bounce back into the Asian range ( 17.2000-17.3200)
      • Before a continuation lower.
  • Focus remains on the US PPI later in the day, and a weaker number (lower than expected) likely to drive the ZAR towards the R17/$ level,
    • With a firm break targeting R16.8000/$

Expected Ranges

  • USDZAR : Expect a range 17.1500-17.4100
    • Importers 17.2000-17.1500
    • Exporters 17.3300-17.4100
  • EURZAR : Expect a range of 17.7300-17.9400
    • Importers 17.8000-17.7300
    • Exporters 17.8700-17.9400
  • GBPZAR : Expect a range of 20.2300-20.4100
    • Importers 20.2900-20.2300
    • Exporters 20.3500-20.4100


  • USDZAR 17.2500
  • EURZAR 17.8200
  • GBPZAR 20.3300


  • The African National Congress (ANC) said it’s close to finalising plans to adopt the step-aside rule in its constitution.
    • The controversial rule used to sanction leaders facing serious criminal charges has often come under fire from some factions within the party.
    • Opponents of the rule believe it was unfairly implemented in some cases – with leaders facing fraud, corruption and murder charges.
    • This of importance as we await news on the Phala-Phala gate saga.
  • COP27
    • SA could possibly kill two birds with one stone after signing loan agreements with France and Germany amounting to €600 million to support the country’s move away from its reliance on coal.
    • The signing of the agreements took place at the COP27 climate change conference in Egypt.
    • With the financial injection, South Africa can move away from coal-powered stations to cleaner energy while alleviating pressure from South Africa’s hamstrung economy. EWN

ESKOM : LOADSHEDDING STAGE 3 until the end of Tuesday


  • US stock futures rose in Asian trade on Tuesday after the major averages ended a choppy session lower.
    • Traders continuing to examine the outlook for US rates following weaker than expected inflation data and comments from Fed governor Waller.
  • Dow, S&P 500 and Nasdaq 100 futures were all up at least 0.2%.
  • In regular trading on Monday, the Dow fell 0.63%, the S&P 500 lost 0.89% and the tech-heavy Nasdaq Composite declined 1.12%, with US stocks snapping a two-day advance.
  • Meanwhile, Fed Vice Chair Lael Brainard said the central bank could slow the pace of rate increases.
    • Investors now look ahead to US PPI data, more Fed speeches and a slew of retail earnings reports. Reuters


  • The yield on the US 10-year yield declined below 3.9%, bouncing off a one-month low of 3.8% touched last week as investors reassessed the outlook for monetary policy.
    • Speculation about a dovish pivot increased on the heels of a softer-than-expected US inflation report, with money markets now pricing an 80% chance of a 50 bps hike in December.
    • However, Federal Reserve Governor Christopher Waller has thrown some cold water in such expectations after warning that policymakers still have work to do before ending interest-rate hikes.
  • In the UK,

    • The yield on the UK’s 10-year Gilt held around 3.3%, its lowest level since September 20th, as investors await the UK government’s fiscal statement on Thursday.
    • British Finance Minister Jeremy Hunt is expected to announce some £60 billion in tax rises and spending cuts.
      • This as he tries to fix the country’s public finances and restore its economic credibility. Bloomberg


  • The Dow fell 211 to 33,536
  • The SP500 fell 35 to 3,957
  • The Nasdaq  fell 127 to 11,196


  • Asian markets higher as investors step in to take advantage from improved risk sentiment.
    • In Japan, the Nikkei 225 rose 0.1% to close at 27,990,  recouping some losses from the previous session. Traders firmly betting on a slowdown in Fed hikes.
      • This after traders look to assess the outlook for US rates following mixed signals from the Federal Reserve.
      • The Japanese yen depreciated past 140 per dollar, retreating further from two-month highs.
        • GDP data showed that Japan’s economy unexpectedly contracted in the third quarter due to global inflation pressures and a weak currency that pushed up import costs.
        • Bank of Japan Governor Haruhiko Kuroda also said this week that the central bank would stick to monetary easing to support the economy,
          • The BOJ citing the desire to achieve sustainable inflation accompanied by wage growth.
  • In China, the Shanghai Composite rose 1% to above 3,100 while the Shenzhen Component gained 1.5% to 11,280 on Tuesday. Reuters
  • The US Dollar traded near 107 on Tuesday, holding gains from the previous session as Federal Reserve officials signalled that US rates could end higher than previously anticipated.
    • This after US inflation expectations picked up for the first time in four months.
    • Comments from Fed Governor Christopher Waller continues to linger after he acknowledged that the central bank may slow the pace of rate increases in the upcoming meetings,
      • but emphasized that markets should focus on the endpoint for rates which is likely still “a ways off” rather than the pace of each move.
    • Fed Vice Chair Lael Brainard also backed easing off rate increases, but said that the Fed still has “additional work to do” in bringing down inflation.
      • Investors are betting that the central bank would moderate the size of their rate hikes to 50 basis points from December after a series of 75 basis point moves in the past four meetings.
      • Markets are also looking ahead to US PPI data and more remarks from other Fed officials later in the day. FX news
  • US WTI crude oil fell toward $85 per barrel on Tuesday, extending a sharp decline from the previous session as a weakening demand outlook outweighed signs of tightening supply heading into winter.
      • Investors also continued to worry about resurgent Covid outbreaks in top crude importer China that made the possibility of an economic reopening more uncertain.
      • A buoyant dollar that has been supported by hawkish Federal Reserve remarks.
      • However, the supply outlook remained clouded after OPEC+ agreed to reduce output by 2 million barrels a day in November,
        • while the European Union will ban Russian oil from December. Gulf energy news
  • Gold prices steadied around $1,770/oz as traders reassessed the outlook for US rates following mixed signals from the Federal Reserve.
    • While Fed officials acknowledged that the central bank may slow the pace of rate increases in the upcoming meetings, they also said that the Fed still has a lot of work to do in fighting inflation.
    • Investors are betting that the Fed would moderate the size of their rate hikes to 50 basis points from December after delivering four straight 75 basis point increases.
    • However, gold remained near its highest levels in almost three months, benefiting mainly from recent weakness in the dollar and a slump in cryptocurrencies.
    • Bullion has always been considered as a safe-haven asset in times of economic uncertainties, though rising interest rates dent its appeal as the metal pays no interest. Kitco metals report.

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