View this email in your browser

Morning NOTE

 20 February 2023


The ZAR recovered sharply in late afternoon trading on Friday, as traders booked profits ahead of a long weekend in the USA.

The Rand recovered nearly 1.70%, as profit taking hit the markets on Friday afternoon.
Traders wary of leaving money on the table, ahead of a long weekend in the USA, with Monday being “President’s day“ i.e. George Washington’s birthday.

  • In addition, the week ahead includes a heavy data set
    • That includes US PCE #inflation, revised Eurozone CPI, and US personal income.
    • We also have the Fed minutes on Wednesday and more Fed speak.
  • Calls remain for a higher terminal rates following higher than expected INFLATION and JOBS data over the last 2 weeks.
    • The US10YT at one stage hitting 3.90%, as retail sales also surprised to the topside.
    • Markets now pricing for an additional 25bps, placing the terminal rate at 5.5%
  • The ZAR moves tracking international money markets, but ESKOM’s stage 6 load shedding being mentioned as a Risk on major trading floors in Johannesburg and London.
    • The yield on the generic SA10YT also spiking on risk off sentiment reaching 10.15%.
    • The spike increasing the governments cost of borrowing for any new debt it tries to raise.
    • All of these factors, ZAR negative .

On the positive side, inflation continues to trend lower, and this likely to be RISK / ZAR supportive, forcing the FED to change path during 2023.

  • EVENT RISK : on Wednesday, 22 February, the Minister of Finance, Mr Enoch Godongwana, will provide details of spending and revenue collection proposals.
    • Minister Godongwana will deliver the 2023 Budget Speech to the National Assembly in the Cape Town City Hall at 14.00.

Data this week 


  • 21h00 : US FOMC MINUTES


  • 11H30 : SA PPI  FORECAST  12.8%  VS  13.5%  YOY
  • 17h50 :  FED BOSTIC SPEECH



Market Movement Today:

  • The ZAR  recovered nearly 2% on Friday as traders booked profits, following a strong run on the US Dollar.
    • Americans celebrating President’s day on Monday, resulting in poor liquidity conditions.
      • Traders using this as an excuse to book some profits.
    • The local unit remains on the back foot following hawkish Fed speakers as well as stronger than expected inflationary data.
  • This morning we opening stronger as weak dollar longs feel the pinch ahead of Wednesday  FOMC minutes.
  • However, with the SA budget speech on Wednesday at 14h00, any momentum for a stronger ZAR likely to be short lived.
  • Foreign institutional investors usually hedge in the FX ZAR market to protect against any “adverse policy” announcements.
  • BIG DATA, sees the FOMC minutes, US GDP and PCE later in the week,
  • All of them likely to set the narrative for future FX moves.
  • Low volatility today but expect this to increase later in the week.
  • Trade :  short term importers to exact cover and exporters to utilise both FX options and FEC’s

Expected Ranges:

  • USDZAR :  Expect a range 17.9400-18.1800
    • Importers 18.0200-17.9400
    • Exporters 18.1000-18.1800
  • EURZAR :  Expect a range of 19.1900-19.400
    • Importers 19.2600-19.1900
    • Exporters 19.3300-19.4000
  • GBPZAR :  Expect a range of 21.6100-21.8200
    • Importers 21.6800-21.6100
    • Exporters 21.7500-21.8200


  • USDZAR 18.0500
  • EURZAR 19.2900
  • GBPZAR 21.7300



  • Eskom has announced that power cuts will remain on stage 6 until further notice due to the breaking down of more generating units at several power stations.
  • The level of the power cuts was meant to have been reduced to stage 4 on Monday morning after Eskom implemented stage 6 from 8pm on Sunday night.
  • But the utility has been battling to keep up with the high number of system failures that have tripped a further eight units on Sunday. EWN


  • Heavy rains have caused flooding in rivers in the Vaal area, submerging homes in water and sweeping cars away. Residents living in the areas alongside the rivers were forced to evacuate.
  • Evacuations around the Vaal Dam are expected to continue on Monday morning amid persistent rain.
  • Twelve of the dam’s sluice gates were opened to alleviate pressure after it exceeded its maximum capacity. News24

Electricity minister

  • The president, since announcing at SONA  that he would create “ ELECTRICITY MINISTER “ in his cabinet,  the country is yet to officially name the person expected to monitor progress in dealing with the current power crisis.
  • SA  is thrust back into stage 6 power cuts, there’s still no word from President Cyril Ramaphosa on who he wants to appoint as the country’s electricity minister.
  • Speculation has been rife that head of infrastructure in the Presidency, Kgosientso Ramokgopa, is likely to be picked as the new electricity minister. EWN


  • The Dow finished 130 points higher on Friday, while the S&P 500 and Nasdaq 100 lost nearly 0.3% and 0.6%, respectively, as investors worried about Fed’s larger rate hikes amid rising bond yields and inflation reports.
    • Last week data showed that producer prices(month on month) hit the highest level in seven months during January, supporting larger rate hikes as inflation remains sticky.
    • Speeches from Federal Reserve officials also supported that the US central bank will have to keep raising interest rates to cool the economy.
    • For the week, the Dow lost 0.5%, while the S&P 500 and the Nasdaq 100 fell 0.8% and 0.2%.


  • The yield on the US 10-year note, seen as a proxy for global borrowing costs, topped 3.9%, a level not seen in three months.
    • Investors continue to adjust their portfolios for a higher terminal rate above 5%.
    • Hawkish data was also followed by a stronger than expected retail sales report and a hotter-than-expected CPI reading.
    • Speeches from St. Louis Fed President James Bullard and his Cleveland counterpart also supported the idea that the US central bank will have to continue to raise interest rates to cool the economy.
    • Money markets have now priced at least three more 25 basis point rate hikes this year and see interest rates peaking at 5.5% by July.

On Friday

  • The Dow added 129 to 33,826
  • The SP500 fell 11 to 4,079
  • The Nasdaq  fell 68 to 11,787

:  image: Trading economics


The US dollar

  • The US dollar traded around 104 and also holding near its strongest levels in 6 weeks as stronger-than-expected US economic data and hawkish remarks from Federal Reserve officials buoyed the currency.
    • Latest data pointed to still elevated inflationary pressures and robust jobs market in the US, supporting the case for further monetary tightening.
    • Cleveland Fed President Loretta Mester said she saw a “compelling economic case” for another 50 basis point rate hike.
  • St. Louis Fed President James Bullard also stated he would not rule out backing a half-percentage point increase at the Fed’s March meeting.
    • Investors now look ahead to the latest FOMC meeting minutes and more Fed commentary this week, as well as the Fed-preferred inflation gauge PCE price index.
    • This week we will get a clearer picture of what the Fed and its governors debate around the hiking cycle.  FX news

Asian markets

  • Asian equity markets rose across the region, on Monday as risk sentiment improved. However trading volume was dampened by a US holiday and hawkish signals from Fed officials continued to weigh on sentiment.
    • Earlier in the session, the Chinese, PBOC kept its key lending rates unchanged for the sixth straight month at its February fixing.
    • Shares in Australia, Japan, South Korea, Hong Kong and China all advanced.
  • In Japan, the Nikkei 225 inched up 0.07% to close at 27,532, erasing losses from earlier in the session.
    • Gains remain capped as hawkish signals from the US Federal Reserve continued to weigh on market sentiment.
    • Investors also continued to assess the outlook for monetary policy in Japan as the country navigates a path out of ultra-low interest rates without upending markets.
  • In China, the Shanghai index rose 0.8% to around 3,250, recouping losses from the previous session, as investors reacted to the latest central bank policy decision.
    • The People’s Bank of China kept its key lending rates unchanged for the sixth straight month.
    • Meanwhile, Goldman Sachs strategists expect an over 20% gain in Chinese stocks by year end.
      • The mega investment bank citing  the country’s economic reopening delivers windfall profits for businesses. Bloomberg

Crude oil

  • US WTI crude futures held below $77/bl after losing about 4% last week.
    • The rising US crude supplies and the prospect of further Federal Reserve policy tightening outweighed optimism over China’s demand recovery.
    • Last week, oil prices came under pressure after the US government announced plans to release 26 million barrels of oil from strategic reserves to combat Russian supply.
      • In addition, the IEA and OPEC raised their forecast for 2023 oil demand growth, citing higher consumption from China.
    • Affecting supply, The Biden administration is also planning to impose new sanctions against Russia for the invasion of Ukraine.
      • Measures reportedly targeting key industries including Russia’s energy sector. Gulf energy news


  • Gold remained below $1,850/oz, and continued to hover near its weakest levels in 7 weeks as rising US yields and a stronger Dollar weigh on prices.
    • The Dollar rebound on the back of stronger-than-expected US economic data and hawkish remarks from Federal Reserve officials weighed on the metal.
      • Latest data showed that US producer prices increased 0.7% MoM in January, the most in seven months and higher than market forecasts of 0.4%, while weekly jobless claims unexpectedly fell.
    • Some Fed officials indicated last week that they are open to a bigger 50 basis point rate hike at the central bank’s March meeting to bring down inflation.
    • Investors now look ahead to the latest FOMC meeting minutes and more Fed commentary this week, as well as the Fed-preferred inflation gauge, the PCE price index. Kitco metals

Copyright ©
2023 RussellStone Treasury 
All rights reserved.

Our mailing address is:

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.