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Morning NOTE

16 September 2022


The ZAR lost more ground vs the Dollar on the back of a sharp decline in Risk sentiment as US yields continue to rise.


  • The Rand weakened to a weakest level of 17.6000 on the back of negative investor sentiment as yields continue to rise.
    • The local unit at the mercy of the Dollar after data once again opened the doors for a discussion around a 100bps hike.
    • In New York stocks continued to fall as the SP500 traded lower, breaking through the 3900 support on the back of a spiking 10YT fast reaching 3.50%.
  • After this week’s CPI report surprised to the upside and yesterday’s US Retail sales jump RISK OFF GRIPPED MARKETS!
  • All of this leading to increased bets that the Fed could raise interest rates by 100bps next week.
    • Increasingly hawkish expectations raised Treasury yields across the board, with the yield on the policy-sensitive 2-year note surging to a 15-year high of 3.86%.
    • Inverting the 2-to-30 year yield curve to its steepest this century.
  • The result a rampant Dollar as Risk assets suffered as well as G7 FX and the this included the ZAR.

All eyes now turn to next week key Central bank meetings with markets on edge for a supersized FED 100 bps.

  • NB: On Wednesday, we have the US FOMC rates decision at 20h00 and this is followed by Powell’s Q&A at 20h30.
  • Then on Thursday we the SARB MPC rates decision at 15h00 SA time.

Significant Market Data


  • 11h00 :  EU (Eurozone ) Inflation EXPECTED 9.10% YOY VS 8.9% PREVIOUS
  • 11H00: EU (Eurozone) Core INFLATION 4.3% EXPECTED VS 4.00%


  • This morning we are once WEAKER with a target of 17.7500 a possibility.
    • Traders exiting Risk assets in droves as RATE HIKE BETS INCREASE.
  • For any ZAR recovery we require the SARB to at least match the FED, else the ZAR could trade to levels last seen in the pandemic.
  • THE BREAK OF 17.5000, allowing ZAR bears to remain in control as the unit tries to test weaker levels close to R18/$.
    • The market also likely increase Dollar longs ahead of next week FOMC meeting, with some speculating for a 100 bps hike.
    • This likely to lead to more Dollar strength and RISK OFF ACROSS THE BOARD.

Expected Ranges

  • USDZAR :  Expect a range 17.5300-17.7500
    • Importers 17.5900-17.5300
    • Exporters 17.6800-17.7500
  • EURZAR :  Expect a range of 17.4400-17.6700
    • Importers 17.5300-17.4400
    • Exporters 17.6000-17.6700
  • GBPZAR :  Expect a range of 19.9800-20.2500
    • Importers 20.0500- 19.9800
    • Exporters  20.1900-20.2500


  • USDZAR 17.5900
  • EURZAR 17.5600
  • GBPZAR 20.0900


  • Jagersfontein continues to fell the fall out after the collapse of the dam wall last week.
    • The tragedy continues as the town has no drinking water as well as electricity, due to damage caused by wide spread flooding. EWN
  • After, a full Bench of the WC High Court ruled that Ramaphosa’s decision to suspend Public Protector Busisiwe Mkhwebane, was invalid and “improper”.
    • She then urgently filed a motion to protect that ruling.
      • She also claimed the current Public protector had failed in her/its duties to continue with the investigation.
    • However, Acting Public Protector Kholeka Gcaleka says advocate Mkhwebane’s claims are “inaccurate and untrue”. NEWS24
  • Eric Wood, who applied for his passport to be returned, faces a backlash from the state.
    • Wood a director in Gupta linked Regiments are widely implicated in the State Capture report.
    • The state said that monitoring  Eric Wood’s movements would be extremely difficult if his two passports, one South African and one British, were to be returned. EWN
  • Eskom plans to apply for a 32% tariff increase from 1 April 2023/24.
    • The tariff application is under consideration by Nersa, which must make a final decision by 24 December.
    • Diesel costs are up massively from R5 billion to R16 billion in 2023/24.
    • For many years, Nersa has disagreed with Eskom on how much revenue it is allowed to raise from consumers and granted it significantly lower tariffs.  IOL


  • Stocks: In regular trading on Thursday, the Dow lost 0.56%, the S&P 500 dropped 1.13% and the Nasdaq Composite tumbled 1.43%.
  • All three benchmarks on track to notch their fourth losing week in five.
    • Better-than-expected retail sales data and jobless claims numbers, on top of a surprisingly high CPI report.
    • increased expectations that the FED will need to step up its fight against inflation.
  • In extended trading, FedEx plunged 16% after withdrawing its full-year guidance and citing macroeconomic trends that “significantly worsened”. REUTERS


  • The US 10YT rose above 3.46%, approaching the over 10-year peak of 3.5% hit in June.
    • Rising concerns that inflation is becoming entrenched deepened expectations that the Fed will further accelerate the pace of its monetary tightening.
    • After this week’s CPI report surprised to the upside, the latest data showed that retail sales unexpectedly pick up and weekly unemployment claims fell to their lowest since May.
  • All of this resulting in a ramping up of bets that the Fed could raise interest rates by 100bps next week. US TREASURY


  • The Dow fell 173 to 30, 961
  • The SP500 fell 44 to 3,901
  • The Nasdaq  fell 167 to 11,552


  • Asian markets are widely lower following a negative session on Wall Street.

    • Stock markets falling hard on the back of rising global yields across the region.
      • In Japan, the Nikkei 225 declined 1.11% to close at 27,568.
        • The benchmark lower after a weak overnight session on Wall Street, as investors fretted about high inflation, rising interest rates and slowing growth globally.
      • In Australia, the ASX 200 fell 1.4% to 6,747, closing at its lowest level in a week and tracking overnight losses on Wall Street.
        • Commodity-linked stocks leading the decline as aggressive monetary tightening and recession fears worldwide dampened sentiment.
        • Reserve Bank of Australia Governor Philip Lowe flagged more rate hikes ahead to bring inflation down but said it would be appropriate to slow the pace of increases at some point.
          • Energy and mining stocks led the decline on weaker commodity prices, with sharp losses from BHP (-1.8%), Rio Tinto (-2.3%) and Newcrest Mining (-2.8%). Bloomberg
  • WTI Crude futures lower near $85/bl but were still set to decline for the third straight week.
    • Traders citing aggressive monetary tightening by major central banks and global recession fears dampened the demand outlook.
    • A strong dollar also added downward pressure on energy prices as it makes commodities more expensive for buyers holding other currencies.
    • Moreover, oil prices plummeted on Thursday after the US Department of Energy backtracked previous reports that the US would restock its emergency reserves should WTI prices drop below $80.
    • The action removing the potential price floor for oil. US Energy News
  • Gold declined sharply near $1,660/oz  and were set for its fourth losing week in five.
    • A strong dollar and an impending interest rate hike from the Fed next week dampened bullion’s appeal.
    • Gold also lost its shine as a safer-haven asset in times of heightened economic uncertainties, while major US companies issued weak guidance on dire economic outlooks.
    • Gold caved under pressure from aggressive rate hike expectations as the U.S. dollar and Treasury yields climbed.
    • The precious metal fell nearly $40 from daily highs and hit more than two-year lows.
    • After failing to hold the $1,700 an ounce level earlier this week, gold retreated even further, touching the lows last seen in April 2020. KITCO METALS
  • The US dollar index firmed up near 20-year highs around 109.8 on Friday.
    • Firmer than expected US retail sales and jobless claims data on Thursday, along with a surprisingly hot CPI report earlier this week;
      • bolstered expectations that the Fed may need to move even more aggressively to arrest surging prices.
    • Some traders betting for a larger 100 basis point rate increase.
    • The dollar was also supported by safe-haven inflows as the US economy remained resilient at a time an ongoing energy crisis in Europe threatened to push the region into recession.
    • The Greenback holds above parity against the Euro and trades near 37-year Highs against the Sterling.

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