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Morning NOTE

20 January 2023


The ZAR continued to weaken on the back of Risk off sentiment as Recession talk intensified at the Davos WEF conference.


The Rand weakened to 17.3700, a loss of 3% from the levels of 16.8600 (after the US PPI data release).

  • Risk off being driven by negative comments intensifying Recession fears for 2023.
    • The sentiment aided by central banks who continue to to push for higher rates, even though inflation appears to have peaked.
    • The US FED speakers appearing the most hawkish even though US inflation data shows a drop.
      • The decline in US PPI will almost certainly lead to a lower CPI at the next print, and likely place more pressure on bond yields.
      • Lower yields will place more pressure on the Dollar and will also provide support to the entire Risk Asset complex.
  • The US dollar index trading at 102.4 and he US10YT trading at 3.41% at the time of writing.
    • The Dollar remaining under pressure with Eurusd above 1.0800 and Sterling above 1.2300.

The SP500 also recovering above 3900 after a heavy few sessions following better than expected US Weekly jobless claims.
Claims below 200k at 185k, indicating a labour market that remains resilient.

Data this week


Nothing of significance today.

Market Movement Today:

  • The Rand recovered from an overnight low of 17.3700.
    • The local unit remained under pressure throughout Thursday on the back of global risk aversion.
      • Local traders citing Eskom, but more than likely the ZAR continued to track global risk assets lower.
      • The SP500 at one stage falling more than 1% below 3900.
    • However, The inflation picture continues to print lower indicating the potential for a dovish Fed pivot sooner rather than later in 2023.
  • Although chatter out of the WEF in DAVOS, continues to keep investors nervous around recession talks,
    • We continue to look at the inflationary macro environment and this allows for more ZAR gains.
      • Eskom continues to weigh on the local unit, but it appears to have been priced in the market and
  • Any good news likely to be even more ZAR supportive.

US rates remain lower with the 10YT at 3.41% .
Add a resurgent Yen and Euro, it appears that the Dollar Bull run has come to and end, and this will be ZAR supportive in 2023.

  • This morning expect a bounce at the European open (ZAR Weakness ) at 10am CAT, before ZAR gains later in the session.
    • We are at the high of the week, and its not uncommon for traders to bag some profits heading into the weekend.

Expected Ranges:

  • USDZAR :  Expect a range 17.1700-17.3500
    • Importers 17.2300-17.1700
    • Exporters 17.2900-17.3500
  • EURZAR :  Expect a range of 18.6100-18.7900
    • Importers 18.6700-18.6100
    • Exporters 18.7300-18.7900
  • GBPZAR :  Expect a range of 21.2300-21.500
    • Importers 21.3200-21.2300
    • Exporters 21.4100-21.5000


  • USDZAR 17.2500
  • EURZAR 18.6900
  • GBPZAR 21.3500


Energy crises

  • Western Cape Premier Alan Winde said that he welcomed a meeting of the Special President’s Coordinating Council (PCC) to discuss the energy crisis on Friday.
    • Winde wrote to President Cyril Ramaphosa this week, asking for transparency and urgency on the country’s energy crisis, specifically on the impact it was having on provincial citizens and its economy.
    • He added that the crisis cost the province R8.2 billion in 2022.
    • The premier said that Ramaphosa needed to take the nation into his confidence. EWN
  • The Democratic Alliance (DA) wants the High Court to force government to share its plans to resolve the energy crisis.
    • But first, first priority to to prevent the implementation of NERSA’s granting of the 18.65% price hike requested by Eskom.  
    • The DA  has now filed its two-part application with the High Court in Pretoria, arguing that the current energy crisis violates the Constitution.
      • The tariff increase, it says, will deny vulnerable groups access to electricity, and lead to less of it being sold.
      • In documents filed with the High Court, DA leader, John Steenhuisen, says government has failed to provide a clear plan to mitigate the crisis. NEWS 24

Matric results

  • Basic Education minister Angie Motsekga revealed that the matric class of 2022 achieved an overall pass rate of 80.1%.
    • “This is the second highest since 2019, which is an improvement of 3.7% from last year,” she said.

Motshekga was announcing the 2022 National Senior Certificate (NSC) examination results in Johannesburg on Thursday. IOL


  • In regular trading on Thursday, the Dow and S&P 500 both fell 0.76% for their third straight losing session, while the Nasdaq lost 0.96% to hit its second negative day in a row.
  • Those moves came as corporate earnings and economic data signalled a slowing economy, overshadowing optimism about a slower pace of central bank policy tightening.
  • US stock futures rose on Friday after the major averages extended a losing streak during Thursday’s regular session, while investors continued to assess the outlook for growth and monetary policy.
    • Nasdaq 100 futures gained 0.3%, while S&P 500 and Dow futures were up about 0.1%.


  • The US 10-year yield, traded at 3.41% after it bottomed around 3.3%, the lowest since September 2022.
    • Traders citing lower inflation data as well as mounting fears of an economic downturn and prospects of a less aggressive Federal Reserve boosted appetite for government debt.
    • This week US producer prices slid by the most since the pandemic’s start, offering further evidence that inflation had already peaked while giving the Fed room to slow its monetary tightening.
    • Money markets are now pricing an almost 95% chance that the US central bank will hike rates by 25 basis points in February.
    • Still, hawkish remarks from several Fed policymakers highlighted that the fight against inflation is far from over.
  • The US 10YT is seen as a proxy for global borrowing costs.


  • The Dow declined 252 to 33,044
  • The SP500 fell 30 to 3,898
  • The Nasdaq  lower by 104 points to 10,852


  • The US dollar remained under pressure and the index steadied around 102 on Friday after facing heightened volatility in recent sessions.
    • Traders assessed a flurry of US data released Thursday which indicated that aggressive interest rate hikes from the Federal Reserve are already having an impact on the economy.
    • However, lower-than-expected unemployment claims in the US last week signalled another month of solid job growth and continued labour market tightness.
      • Meanwhile, a chorus of Fed officials reiterated their commitment to tighter policy this week, with Vice Chair Lael Brainard saying rates would need to stay elevated for a period to further cool inflation.
    • Still, easing US inflation drove expectations that the Fed will downshift to a smaller 25 basis point rate hike in February after delivering a half-percentage point increase in December. Fx news


  • Asian markets mixed but broadly higher following a recovery on Wallstreet.
    • Markets have been on the back foot on the back of recessionary fears and ignoring benign inflationary data, that could result in a dovish Fed pivot.
  • In Japan, the Nikkei 225 rose 0.56% to close at 26,553, recouping some losses from the previous session,
    • Investors ignoring strong inflation reading which supported the case for a policy shift from the Bank of Japan.
    • The country’s annual core inflation rate hit a fresh 41-year high of 4% in December, exceeding the central bank’s 2% target for the ninth straight month.
      • The benchmark indexes also finished higher for the second straight week as China’s reopening bolstered the outlook for the global economy,
        • while easing inflationary pressures in other major economies raised hopes for a slower pace of central bank policy tightening. Reuters
  • US Crude oil WTI rose above $81/bl on Friday and were set to gain for the second straight week,
    • Prices supported by an improving demand outlook in China and supply worries stemming from tightening sanctions on Russian flows.
    • The International Energy Agency said that global consumption will likely reach a record daily average this year.
    • The IEA citing top crude importer China lifting strict Covid curbs, while price cap sanctions on Russia could dent supply.
    • Multinational bank Goldman Sachs argued that solid demand growth could send oil prices above $100 in 2023. Gulf Energy news
  • Gold remained  above $1,920/oz, remaining near its strongest levels in nine months on firm expectations that the US Federal Reserve will slow the pace of its interest rate hikes.
    • The metal is also on track to gain for the fifth straight week.
      • The gold market tracking the treasury yields (inverse relationship), and bullion continues to benefit from lower yields.
    • Markets are currently expecting the US central bank to downshift to a smaller 25 basis point rate hike in February after delivering a half-percentage point increase in December.
      • Elsewhere, UK CPI fell for the second straight month in December, adding to further signs that inflationary pressures may have finally peaked in Western economies.
      • Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion, and vice versa. Kitco metals

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