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Morning NOTE

18 April 2023


The ZAR weakened on Monday after a comments by Fed member Chris Waller allowed for a rebound in the Dollar.


The ZAR retraced most of its gains, losing ground from 18.0500 (the Monday open), to register a trading print above 18.3000.

  • The move after continued hawkish comments from Fed governor Chris Waller , who remined markets that inflation remained above the Fed’s 2% level.
    • In turn rates markets repriced another possible rate hike in June (+25) and top of the much anticipated 25 in May.
    • Traders also cautious about possible cuts in H2.
    • The Yield on the US 10 YT rising towards 3.6% on those comments and also allowing for a rebound in the Dollar.

What is clear is the governors are ignoring the “trend” of inflation and this is in contrast to US treasury secretary Janet Yellen’s comments

  • Who effectively called for a pause and to avoid a further “systemic banking crises”. Waller clearly ignoring the impact of Fed hikes on the banking system.
  • The solid earnings reports shown by the Mega US banks illustrates that the crises is effectively on-going as depositors swap funds,
    • from regional banks into Money market funds and mega banks.
    • This will continue to drain money from the system, as unlikely that a mega bank would lend to a manufacturer in rural America (i.e. the role of regional banks).
  • Thus, we expect the trend in inflation to continue lower and the FED PIVOT to be sooner rather than later.
    • And, this would be Dollar negative and support risk assets like the ZAR, EMFX and the SP500
  • USDZAR 18.2900
  • DXY 101.89
  • SP500 4159
  • GOLD 2000
  • EURUSD 1.0951

Data This week






Market Movement Today:

  • The Rand weakened on the back of a rebound in the Dollar following comments from Fed governor Chris Waller.
    • Waller calling for more hikes, because inflation is not yet at 2%.
      • He is clearly ignoring the disinflationary process but markets reacted to his comments.
      • The Dollar gaining and risky assets like Gold and Crypto all declining.
    • The result was a weaker ZAR Monday.
    • This morning, a positive risk session in Asia following a rebound in Chinese GDP allowing for a strong start to the day.
    • The ZAR gaining 7 cents at the European open.
    • The inflation trend however appears to have turned lower and we expect the ZAR to continue to gain in this environment.
      • On a carry trade basis the ZAR remains attractive.
      • Also, we remind the reader that, SA inflation data on Wednesday, likely to attract more attention given the SARB’s last rate action of 50 bps.
    • The  global inflation theme has moved in favour of the ZAR and a pause by the FED will see sharp / strong gains by the ZAR.
    • Weakness in the ZAR or more likely “ Dollar rallies” provide opportunities for Exporters to sell Dollars.
  • NB: We must advise that volatility likely to increase as we head into the next Fed meeting.
    • Risk : News of Eskom stage 8, concerning traders and in the absence of liquidity the ZAR moves likely to be exacerbated.
  • Trade : SELL USDZAR on Rallies.
  • Sell : 18.3300
  • Buy : 18.1900-18.1200

Expected Ranges:

  • USDZAR : Expect a range 18.4000-18.1200
    • Importers : 18.1900-18.1200
    • Exporters : 18.3300-18.4000
  • EURZAR : Expect a range of 20.0800-19.8800
    • Importers : 19.9300-19.8800
    • Exporters : 20.0300-20.0800
  • GBPZAR : Expect a range of 22.7900-22.4700
    • Importers : 22.5500-22.4700
    • Exporters : 22.7100-22.7900


  • USDZAR : 18.2900
  • EURZAR : 20.0000
  • GBPZAR : 22.6800


Electricity crises
Eskom Stage 6 continues

  • With the country grappling with stages 5 and 6 power cuts, Electricity Minister Kgosientsho Ramokgopa said that he would soon present his energy plan to Cabinet for approval.
    • Ramokgopa, who is also an ANC  national executive committee member, met with the party’s national working committee in Limpopo on Monday to discuss his proposed plan. EWN

New Tshwane Mayor

  • The capital city’s executive mayor said the City of Tshwane would sell municipal-owned building and unused land that were not producing any revenue.
    • This would allow the cash-strapped metro to generate at least R100 million from sales.
    • This after, he ordered a forensic investigation after city officials made more than R2 billion in undisclosed payments to South African Revenue Service (Sars).
    • He said the payments relate to outstanding vat on an irregular contract the city entered into with PEU Capital Partners in 2013 for the provision of smart meters.
    • Brink was speaking during a media briefing at the municipality’s headquarters in Tshwane House on Monday. EWN

New BEE bill to face legal hurdles

  • Solidarity is readying for ‘major litigation’ and the DA says it will join the fight, while others see pros and cons in the amended legislation.
  • SA’s newly amended employment equity bill is set to be legally challenged as trade union Solidarity and the DA prepare to head to court to have it overturned.
  • The Employment Equity Amendment Bill was passed by parliament last year and signed into law by President Cyril Ramaphosa on Wednesday.
  • Under the new law, workplaces with more than 50 employees will be required to develop transformation or equity plans for their companies which are to be aligned to equity targets for economic sectors and geographical regions.
  • Employers will also be required to submit annual reports to the Department of Employment and Labour and pay workers equal pay for equal work. Moneyweb


  • Futures contracts tied to the three major indexes were all trading near breakeven.
  • On  Monday, the Dow rose 0.3%, the S&P 500 gained 0.33% and the Nasdaq Composite added 0.28%, with 8 out of 11 S&P sectors finishing higher.
  • Quarterly reports from financial firms have so far indicated that US banks are holding up well in the aftermath of the banking crisis that plunged the sector last month.
  • Investors also continued to assess the economic outlook and how companies are faring under a period of elevated inflation and rising interest rates.
  • Earnings from Bank of America, Goldman Sachs and Netflix are slated on Tuesday.


  • The 10-year US yield, seen as a proxy for borrowing costs worldwide, consolidated above 3.5% on expectations of further rate hikes by the Fed.
  • Concerns about a potential US recession and further stress in the banking sector eased amid better-than-expected results from several of the biggest banks.
  • At the same time, investors were worried by Federal Reserve Governor Christopher Waller’s comments.
  • He continued to be leaning toward further policy tightening as both headline and core inflation remain well above the central bank’s 2% target.
  • His views prompted investors to ramp up bets on another rate hike in June, following one next month, while scaling back expectations for rate cuts later in the year.


  • The Dow added 100 points to 33,917
  • The SP500 gained 13 to 4,151
  • The Nasdaq added 34 to 12,157

  image: Trading economics


The US Dollar

  • The dollar recovered to move above 102 and also consolidating gains of more than 1% in the past two sessions.
    • Late Friday data bolstered market expectations that the Federal Reserve will raise interest rates again in May.
    • Latest data showed that confidence among US single-family homebuilders improved for a fourth straight month in April,
      • while manufacturing activity in New York expanded for the first time in five months.
  • Solid corporate earnings results from major US banks also allayed some concerns about the banking crisis that plunged the sector last month.
  • Markets are currently pricing a near certainty that the Fed would hike rate by 25 basis points next month.
  • BUT rate curves also show an expectancy still expecting rate cuts towards the end of the year.
  • Investors now look ahead to the latest US housing starts and building permits data on Tuesday. Fx News

Asian markets rallying strongly after China released a strong set of GDP data.

  • Beating market estimates, the Chinese economy advanced 4.5% yoy in Q1 of 2023, accelerating from a 2.9% growth in Q4, above market forecasts of 4%.
    • It was the strongest pace of expansion since Q1 of 2022, amid efforts from Beijing to spur the post-pandemic recovery.
    • Retail sales growth was at a near 2-year high in March, industrial output rose the most in 5 months, and the surveyed jobless rate fell to its lowest in 7 months.
    • The Shanghai Composite gaining 0.2% to 3,397.
  • In Japan, the Nikkei 225 climbed 0.4% to around 28,628, hitting their highest levels in over five weeks.
    • It was lifted by rallying financial stocks as solid quarterly performances from US banks allayed some concerns about the recent banking turmoil.
    • Investors also look ahead to Bank of Japan governor Kazuo Ueda’s latest remarks as he appears before a Diet committee on Tuesday. Reuters

Crude oil

  • Brent crude futures rose above $85/bl and US WTI crude futures rose above $81/bl on Tuesday, recouping some losses from the previous session.
    • Investors welcomed data showing China’s economy grew more than expected in the first quarter and thus boosting optimism about the country’s post-pandemic recovery.
    • The IEA recently stated that it expects China to account for most of the 2023 oil demand increase.
    • The agency also warned that the surprise production cut by OPEC+ will tighten the market more than initially thought and drive oil prices higher.
  • Meanwhile, investors continued to worry about the prospect that major central banks will raise interest rates further to bring down inflation.
    • Recent inflation data says the concerns are misplaced but ,
      • The sentiment hurting the outlook for economic growth and oil demand globally.
    • Expectations that the US Federal Reserve will hike rates again next month also lifted the dollar at the expense of commodities and other risk assets. Gulf Energy news


  • Gold prices declined on the back of a recovering Dollar, to trade below $1990/oz. Yields rising in anticipation of another FED rate hike.
    • Prices extending a 2% drop on Friday, as investors continued to assess the economic and monetary policy outlook.
    • Markets are pricing in a nearly 87% chance of a 25bps hike in the fed funds rate in May.
    • Meanwhile, the ECB is expected to prolong its tightening next month though the size of the rate increase is still uncertain.
    • Despite the recent two-day weakness, the bullion holds close to levels not seen since March last year,
      • prompted by a weaker dollar and prospects that major central banks, especially the Fed, are nearing the end of their hawkish campaign. Kitco metals

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