The ZAR weakened on the back of global risk off, following a sharp spike in Global yields.
- The Rand reached a weakest level of 18.3400, following a sharp spike in global interest rates after the UK CPI printed at 40 year highs.
- Very early in the session, UK CPI surprised the market to the topside with 10.1% actual vs 9.9% expected.
- The data sending a shock through markets as US 10’s hit 4.14%
- In addition, the SP500 fell sharply on the back of yields (below 3700) and disappointing results out of Tesla.
- The automaker falling more than 5% after missing revenue estimates.
- All of this contributing to RISK OFF across the board, with the US dollar the primary beneficiary.
- Also the USDJPY at risk of breaching the ¥150 mark, as policy divergence continues to batter the Yen.
- Risk: Japanese authorities continues to warn and possible intervention could happen.
- The result : Weaker ZAR on the back of weaker RISK ASSETS.
- Earlier in the day SA CPI printed at market expectation levels of 7.5% .
- The rate remains above the SARB’s upper band and will likely lead to more hikes from the SA Reserve Bank.
- Core CPI was also higher at 4.7% YOY vs 4.5% expected.
Significant Market Data:
- Nothing of significance , although the session once again dominated by Fed speakers.
- The ZAR remained weaker following another weak session on Wallstreet.
- Markets opening risk off as US yields continues to spike and in turn supporting the Dollar.
- Fed speakers continue to push for higher rates and the ZAR likely to remain under pressure in this environment.
- The higher than expected SA inflation data unable to slow the decline in the local unit, with the US10YT at 4.16%.
- Markets needing weaker economic data to slow FED rate policy,
- and for now this the only way the ZAR can recover.
- Against this backdrop, we once again expect a WEAKER ZAR, and a break of 18.3600 likely to target 18.5000.
- Trade today : BUY USDZAR
- USDZAR : Expect a range 18.1300-18.4600
- Importers 18.2400-18.1300
- Exporters 18.3500-18.4600
- EURZAR : Expect a range of 17.7000-18.0600
- Importers 17.8600-17.7000
- Exporters 17.9300-18.0600
- GBPZAR : Expect a range of 20.3400-20.7300
- Importers 20.4700-20.3400
- Exporters 20.6000-20.7300
- USDZAR 18.2800
- EURZAR 17.8900
- GBPZAR 20.5200
- MATRIC EXAMS AT RISK
- There are only two weeks to go before the start of the national senior certificate examinations.
- Teacher unions are concerned that the crippling water shortages and electricity crisis could compromise the integrity of the exams.
- Both public and independent schools are expected to begin their exams later this month.
- This year, more than 923,000 pupils will sit to write their final year exam in public schools while over 13,000 others will do so in private schools.
- The 2022 matric class has been hardest hit by the COVID-19 pandemic, as they started dealing with its impact in grade 10.
- Pupils in Gauteng and KwaZulu-Natal have also had to face damaged property and school closures
- after floods and the unrest which resulted in more than 140 schools being vandalised. EWN
- Stage 3 power cuts have been extended from 5AM on Thursday until further notice.
- Eskom said that this was due to unit failures at the Kendal, Kriel and Arnot power stations. EWN
- TECHNICAL RECESSION
- South Africa’s economy is likely in a technical recession.
- This according to Citibank economist Gina Schoeman.
- This as intensified power cuts and heightened uncertainty caused by Russia’s war with Ukraine rippled through global financial markets.
- The economy likely contracted for a second consecutive quarter in the three months through,
- said Schoeman at the Bloomberg Capital Markets Forum in Johannesburg on Wednesday. Moneyweb
- In regular trading on Wednesday, the Dow fell 0.33%, the S&P 500 lost 0.67% and the Nasdaq Composite dropped 0.85%, with US stocks snapping a two-day winning streak.
- US stock futures lower, as the Nasdaq 100 futures lower following Tesla’s plunge in late trading on softer-than-expected third-quarter revenue.
- S&P 500 futures also dropped 0.3%, while Dow futures drifted flat to slightly negative.
- In extended trading, Tesla slumped 5% after reporting a revenue of $21.45 billion, less than the $21.96 billion forecasted by analysts.
- Alcoa also tumbled 8% on an earnings and revenue miss, as well as lower 2022 shipment projections, while IBM jumped 3% on better-than-expected Q3 results.
- Those moves came as Treasury yields surged, with the benchmark 10-year US yield rising above 4.1% to its highest since July 2008.
- Investors now look ahead to more earnings reports on Thursday and a number of economic releases. CNBC
- The US Treasury yield, topped the 4.1% mark, the highest since October 2008,
- with investors fretting about the prospects of a recession from aggressive central bank actions to tame inflation.
- Minneapolis Fed President Neel Kashkari was the latest policymaker to warn that the central bank might need to lift its policy rate above 4.75% .
- if underlying inflation continues to accelerate.
- Germany’s 10-year Bund yield, the European benchmark, rose to as high as 2.4%, closing in on its highest level since August 2011.
- Also, volatility is expected to remain elevated, with sharp moves in gilts sending shockwaves through other bond markets. BLOOMBERG
- The Dow fell 99 points to 30,423
- The SP500 fell 24 to 3,695
- The Nasdaq fell 91 to 10,680