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Morning NOTE

20 July 2023


The ZAR continued to consolidated below the R18/$ handle as traders await today’s SARB MPC rate decision.


The Rand’s advance continued with the local unit testing R17.80/$ in early trading.

  • Local traders in conflict with economists on what the SARB is likely to do this afternoon.
    • The FRA ( short term interest rate market) continues to price for a 25 bps hike, whereas the analyst community are all calling for a pause.
    • For now spot ZAR appears to be pricing in a hike (i.e. with the Fra’s).
  • Risk assets also continued to advance at the expense of the US Dollar, with the Sp500, tech heavy Nasdaq all consolidating recent gains.
    • We have US jobless claims data this afternoon and a strong report likely to support a Fed hike next week.
  • Supporting the ZAR was news that Russian President Vladmir Putin, would not be attending the BRICS summit in SA next month.
    • The decision likely avoiding a diplomatic disaster after the ICC’S  arrest warrant for the Russian leader.
  • However all eyes on today’s SA Reserve Bank rates decision
  • Market opinion remain split with the FRA markets pricing for a 25 bps hike, while economists are calling for no hike.
  • Yesterday, SA annual CPI eased further to a 19-month low of 5.4% in June 2023.
    • It was down from 6.3% in May and below market forecasts of 5.6%, moving back to the central bank’s target range of 3%-6%.
    • Food inflation eased to an eleven month low of 11% (vs 11.8% in May) and prices also softened for household contents & services (4.6% vs 5.6%). source: Statistics South Africa


  • The SARB increased its main lending rate by 50 bps to 8.25% during its May meeting, pushing borrowing costs to their highest level since May 2009.
    • The move surprising the market, which had anticipated a smaller rate hike of 25 bps.
    • Policymakers cited concerns regarding the significant depreciation of the rand and the mounting pressures of inflation as key drivers behind the rate adjustment.
    • The SARB also revised its inflation forecasts, with inflation for 2023 now projected to average 6.2%, up from the previous estimate of 6.0%.
    • For 2024, inflation is expected to average 5.1%, up from the earlier projection of 4.9%.
    • This previous rate hike by the SARB marked the 10th consecutive increase in interest rates.
    • The moves totalling 475 basis points since the policy tightening began in November 2021. source: SARB

Data This week

    • REPO 8.25%, PRIME LENDING RATE 11.75%



Market Movement Today:

  • The ZAR maintained it recent gains with consolidation below the R18/$ level.
    • The local unit’s bullish run continued with more early session buying pushing the unit towards the R17.80/$.
  • Traders awaiting this afternoon’s key SARB MPC meeting, with analysts calling for “unchanged”
    • i.e. zero rate hike especially, after yesterday’s surprise in lower than expected SA CPI.
    • According to STATS SA, SA annual CPI eased further to a 19-month low of 5.4% in June 2023.
      • It was down from 6.3% in May and below market forecasts of 5.6%, moving back to the central bank’s target range of 3%-6%.
  • A Pause by the SARB likely to be welcomed by SA citizens that have seen borrowing costs spiral out of control.
    • Adding to the woes of Eskom, commentators are betting on a pause.
  • The ZAR, like other high yielding currencies all benefiting from the carry advantage.
    • A pause by the SARB and a hike by the Fed next week could “reverse” or at least slowdown the ZAR’s current bull run.
  • For now, the trend remains in favour of the ZAR ahead of the MPC tomorrow and the ZAR remains a BUY
  • Trade :  SELL USDZAR on rallies  

Markets this morning

  • USDZAR 17.8700
  • DOLLAR 100.18
  • EURUSD 1.1215
  • SP500 4,555
  • GOLD 1982
  • US10YT 3.77%

Expected Ranges:

  • USDZAR : Expect a range 17.7000-18.000
    • Importers : 17.8000-17.7000
    • Exporters : 17.9000-18.000
  • EURZAR : Expect a range of 19.9100-20.1200
    • Importers : 19.9800-19.9100
    • Exporters : 20.0500-20.1200
  • GBPZAR : Expect a range of 22.9900-23.2000
    • Importers : 23.0600-22.9900
    • Exporters : 23.1300-23.2000


  • USDZAR : 17.8700
  • EURZAR : 20.0300
  • GBPZAR : 23.1300


Large explosion in JHB CBD

  • Several commuters have been seriously injured during an underground gas explosion near the Bree taxi rank in central Johannesburg.
    • The explosion, which has caused great damage and chaos in the area, happened around 5pm on Wednesday.
    • The injured taxi commuters were rushed to the nearest hospitals for treatment.
    • Eyewitnesses said that they heard what sounded like a large explosion.
    • In the aftermath of the explosion, several taxis carrying passengers were trapped on the road. Source EWN


  • The Presidency has on Wednesday confirmed that Russian President Vladimir Putin won’t be attending the BRICS (Brazil, Russia, India, China and South Africa) Summit in Johannesburg next month.
    • In a statement, The Presidency said Russia would be represented by the country’s foreign minister – Sergey Lavrov.
    • Lavrov attended the BRICS foreign ministers meeting in Cape Town last month.
    • The confirmation of Putin not travelling to South Africa comes as the Democratic Alliance planned to head to court on Friday.
    • The DA’s seeking action that would have forced the government to execute an arrest warrant for war crimes issued by the International Criminal Court. Source  News24

Transnet Richards Bay expansion

  • Transnet National Ports Authority (TNPA) wants to partner with the private sector to expand its container facility capacity at the Port of Richards Bay in KwaZulu-Natal (KZN).
    • On Wednesday, the division of the state-owned rail, port and pipeline company Transnet called on interested parties to respond to its request for proposals (RFP) to;
      • fund, design, develop, operate, maintain and transfer a container handling facility for a 25-year term. Source : Moneyweb



  • Equities continue to advance on the back of declining yields.
  • US stock futures fell on Thursday as the latest quarterly results from key technology names disappointed the market.
  • Nasdaq 100 futures tumbled 0.7%, while S&P 500 and Dow futures lost 0.3% and 0.1%, respectively.
  • In extended trading, Tesla dropped 4% as concerns about lower operating margins outweighed a record quarterly revenue, while Netflix plunged 8% on a revenue miss.
  • In regular trading on Wednesday, the Dow gained 0.31%, the S&P 500 rose 0.24% and the Nasdaq Composite inched up 0.03%, with eight out of the 11 S&P sectors ending higher.
  • Those gains came on the heels of upbeat quarterly results and firm expectations that the Federal Reserve is close to ending its rate-hiking cycle.
  • Investors now look ahead to more economic data and corporate earnings reports on Thursday.

Bond yields steady ahead of today’s US weekly jobs data.

  • US 10 Year Note Bond Yield was 3.77 percent on Thursday July 20, according to over-the-counter interbank yield quotes for this government bond maturity.
  • Traders on the defensive with yields likely to be determined by the Fed’s actions next week.
  • In addition weekly jobless claims likely to have an effect on the market this afternoon. 

Yesterday’s close

  • DOW  +109 to 35,061
  • SP500 +10 to 4,565
  • NASDAQ +4 to 14,358

Futures open


Asian markets

  • In Japan, the Nikkei 225 Index fell 0.4% to below 32,800, snapping a two-day advance, as Japanese technology stocks tracked a post-market dip in key US tech names driven by disappointing quarterly results.
    • Investors also digested data showing Japan unexpectedly logged a trade surplus in June amid a sharp decline in imports. Losses in the technology
  • In China, the People’s Bank of China (PBoC) maintained its key lending rates at the July fixing, as widely expected.
    • Thursday’s move came after the central bank earlier in the week kept its medium-term policy rate unchanged despite further signs of stalling economic recovery that calls for fresh stimulus.
    • The 1-year loan prime rate (LPR) was left unchanged at 3.55%; while the 5-year rate was kept at 4.2%. source : Reuters

Oil prices remain well supported on the back of supply concerns.

  • WTI crude futures steadied above $75 per barrel on Thursday after facing heightened volatility in recent sessions, as traders continued to assess the outlook for the oil market in the second half of the year.
    • Oil prices found support earlier this week after China’s top economic planner pledged on Tuesday to roll out policies to “restore and expand” consumption in the world’s top crude importer.
    • On the supply side, Russia’s energy ministry said the country will cut oil exports by 2.1 million tons in the third quarter, in line with planned voluntary export cuts of 500,000 barrels per day in August.
    • Expectations that the end of the current monetary policy tightening cycle is getting closer also added to bullish sentiment.
    • Meanwhile, official data showed that US crude inventories declined by 708,000 barrels last week, compared with market expectations for a larger 2.4 million barrel drop. Source : Trading economics


Precious metals continue to advance.

  • Gold rose above $1,980 an ounce on Thursday.
    • The yellow metal  hitting its strongest levels in two months as easing US inflation raised hopes that the Federal Reserve is close to the end of its current monetary policy tightening cycle.
      • Still, the US central bank is widely expected to raise interest rates by 25 basis points this month, while traders scaled back bets of further rate increases this year.
      • Investors now look ahead to the initial jobless claims data in the US for clues on the strength of the labour market.
      • The ECB and the BOE are also expected to lift rates further in their upcoming meetings despite signs of easing inflation.
    • Meanwhile, the People’s Bank of China kept its one and five-year loan prime rates unchanged at its July fixing,
      • defying expectations that Chinese authorities would ease policy further to spur growth. Source : Kitco


  • The US dollar index regained the 100 mark, as investors continued to assess the outlook for Federal Reserve monetary policy.
    • Traders also digested data showing US retail sales growth for June fell short of forecasts, but consumer spending remained resilient in other areas.
    • Still, the dollar remains near its lowest levels in over a year due to easing US inflation, which has raised hopes that the Federal Reserve may be reaching the end of its current monetary tightening cycle.
    • The central bank is widely expected to raise interest rates by 25 bps this month, possibly indicating the conclusion of their tightening measures.
      • The euro moved away from a 17-month low against the USD to $1.122 after dovish comments from some ECB officials.
      • The sterling weakened sharply after a lower-than-expected CPI reading while the NZD appreciated past $0.623 after a hotter-than-expected CPI print.
      • The yen weakened toward $140 as BoJ governor reiterated his commitment to maintaining an ultra-loose monetary policy. Source : Forexnews

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