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Morning NOTE

2 December 2022


The ZAR continued to weaken on the back of the SA presidential crises to reach 17.9500 in Johannesburg afternoon trading.


The Rand lost 6.2% vs the USD, 6.10% vs the GBP and 7.60% vs the Euro on the back of SA presidential crises.

  • SA president Cyril Ramaphosa remains under pressure as calls for him to resign intensify on the back of the findings in connection with the burglary at his Phala-Phala farm.
    • It is alleged that large amounts of foreign currency (between $500k to $4mio), depending on whom you believe was stolen and found on the property.
    • This is in direct contravention of the SARS exchange control act, and would be regarded as a crime.
    • Ramaphosa is said to be considering his position as Head of State and Party as calls continue for him to resign or face impeachment.
      • However, the President’s allies, who stand the most to lose, is asking for him to stay on, and take his chances in impeachment proceedings.
      • He is scheduled to address the nation tonight.
    • All of this placing the ZAR under severe pressure even though sentiment in global markets have turned global markets sentiment have turned favourable and should result in a Stronger ZAR.
  • In the USA (this week) ;  Fed chair Jerome Powell confirmed a dovish pivot from the FED.
    • The US PCE data printed lower, (the Personal consumption expenditure gauge) – the FED’s barometer for Inflation.
    • All of this,  pointing to slower rate hikes or even a pause in 2023. 
      • This is all risk positive as reflected by the rally in global stock markets.
      • US yields lower, causing a rotation out of the DOLLAR into other currencies and risk assets all supporting this view.
    • Unfortunately – local factors preventing the ZAR from benefiting from this environment.

**Key risk events : Cyril Ramaphosa  & Non-farm payrolls.

Significant Market Data:



  • The ZAR opening stronger after the violent sell-off on Thursday.
    • News that CR might change his mind on resignation causing a bit of ZAR buying,
    • But the risk remains to the top-side (i.e. weaker ZAR).
  • Global markets conditions are supportive of a stronger ZAR after the FED’s dovish pivot.
    • Inflationary conditions are easing in the world’s largest economy and risk assets are benefiting from this environment.
    • The SP500 above 4000 and the US10YT at 3.52% showing this trend.
  • Unfortunately the ZAR facing an internal crises, but once the uncertainty is removed we can expect more ZAR gains.
    • Markets ultimately track monetary policy and the winds have shifted in favour of the ZAR.
  • We also have US NFP report this afternoon, the last reading before the December Fed meeting.
    • This would likely give us an idea on rate decision and policy stance for 2023. 
  • Event risk : CR’s announcement. 
    • Trade :  BUY US DOLLARS until we have confirmation on CR’s decision.,

Expected Ranges

  • USDZAR :  Expect a range 17.4000-17.8400
    • Importers 17.5100-17.4000
    • Exporters 17.7300-17.8400
  • EURZAR :  Expect a range of 18.3000-18.7800
    • Importers 18.4200-18.3000
    • Exporters 18.6600-18.7800
  • GBPZAR :  Expect a range of 21.3200-21.8400
    • Importers 24.1500-21.3200
    • Exporters 21.7100-21.8400


  • USDZAR 17.5500
  • EURZAR 18.4700
  • GBPZAR 21.4600


  • As more uncertainty grows, it has emerged that President Ramaphosa might ignore calls for his resignation.
    • Presidential spokesperson Vincent Magwenya said President Cyril Ramaphosa does not lack confidence in his own caucus to shield him from having to face an impeachment inquiry.
    • In light of the independent judicial report – – the African National Congress (ANC)’s parliamentary caucus will have to display a united front to back him.
    • The recommendations of the Section 89 panel report on the Phala Phala burglary are not binding on the National Assembly.
    • This means the ANC has the numbers to stop the impeachment process from going any further. EWN
  • After postponing his resignation speech it has now emerged that Ramaphosa might make a u-turn as he was told to resist and “fight” the impeachment proceedings. 
  • The country and markets now await for news on his resignation.


  • US stock futures edged lower on Friday as investors cautiously awaited the November jobs report, which would be the last monthly employment report before the Federal Reserve meets on Dec. 13-14.
    • Dow and S&P 500 futures fell about 0.2%, while Nasdaq 100 futures lost 0.1%.
  • In trading on Thursday, the Dow and S&P 500 dropped 0.56% and 0.09%, respectively, while the tech-heavy Nasdaq Composite rose 0.13%.
  • Traders citing mixed economic data, with a larger-than-expected decline in US manufacturing activity for November countering a mild easing in inflation and robust consumer spending in the US for October.


  • The yield on the US 10-year Treasury, traded lower at 3.52% a level not seen since late September.
    • A dovish Powell and lower than expected PCE data, indicating that it may be appropriate to slow the pace of interest rate increases.
    • Traders citing the Fed acknowledging that soft economic data hinted that its aggressive policy is taking effect on the economy.
    • The Fed’s preferred inflation measure, the US core personal consumption expenditures price index, eased to 5%, in the latest signal that inflation could be peaking.
    • Now all eyes turn to November non-farm payrolls and unemployment rate data, due on Friday, or more clues on future interest rate hikes.


  • The Dow fell 194 to 34,395
  • The SP500 declined 3 points to 4,076
  • The Nasdaq  rallied 14 points to 11,482


Asian markets lower following a negative print on wall street .

  • In Japan, the Nikkei 225 dropped 1.59% to close at 27,778, hitting it’s lowest levels in three weeks and resuming this week’s decline, with all sectors finishing in negative territory.
    • Investors also digested mixed US economic data and turned cautious ahead of a key US jobs report that could influence the rates outlook.
    • Markets continued to track Covid developments in China after authorities signalled slight easing of their strict Covid rules.
    • Healthcare and consumer stocks led the retreat, with losses.
  • In China,  the Shanghai index fell 0.29% to close at 3,156 on Friday, easing from 11-week highs as investors took some profits off the table.
    • The move on the back of a strong rally driven by China’s softening stance on Covid.
    • In the latest developments, a top Chinese official hinted at a more moderate approach in fighting the virus,
      • while Beijing announced that it would allow low-risk patients infected with the virus to isolate at home.  Reuters
  • The US dollar continued its recent decline to trade 105 on Friday and is on course to finish the week lower as investors cautiously awaited the November jobs report.
    • Today’s NFP will be the last monthly employment release before the Federal Reserve meets on Dec. 13-14.
    • The greenback fell about 1% on Thursday after US PCE inflation slowed to a ten-month low in October, while US manufacturing activity declined more than expected in November.
    • On Wednesday, Fed Chair Jerome Powell said that “slowing down at this point is a good way to balance risks,” and that the Fed could moderate the size of rate hikes as soon as December.
    • BUT, Powell warned that controlling inflation “will require holding policy at a restrictive level for some time.” FX news


  • Crude WTI crude futures held above $81 per barrel on Friday and were on track for a weekly rise for the first time since early November.
    • Prices were benefiting mainly from China’s softening stance on Covid that sparked hopes for a rebound in demand from the world’s top crude importer.
    • A top Chinese official hinted at a more moderate approach in fighting the virus, while Beijing announced that it would allow low-risk patients to isolate at home.
  • On the supply side, latest data showed that US crude inventories fell by nearly 13 million barrels last week.
    • It was  the most since June 2019, while traders fretted about the prospect of further production cuts from OPEC+ ahead of its meeting on Dec. 4.  Gulf energy news


  • Gold held its recent advance to trade above $1,800/oz on the back of a declining Dollar following Jerome’s Powell’s comments as well as lower US PEC data.
    • Traders now braced for a key US jobs report which could influence the rates outlook, while digesting data which showed that US PCE inflation slowed to a ten-month low in October.
    • Earlier in the week, Fed Chair Jerome Powell said that “slowing down at this point is a good way to balance risks,” and that the Fed could moderate the size of rate hikes as soon as December.
    • It confirmed market expectations that the Fed would deliver a smaller 50 basis point rate hike this month, after raising rates by 75 basis point in the last four meetings.
    • Market pricing also indicated that the Fed funds rate will peak below 5% in May 2023 following Powell’s comments, lower than previous expectations for a peak above 5% in June. Kitco metals

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