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Morning NOTE

21 November 2022


The ZAR strengthened to reach 17.2000 in Friday trading on the back of positive Risk sentiment.


  • The Rand continued to strengthen to reach 17.2000, as market reacted positively to recent data releases.
    • Inflation appears to have peaked and risk assets are benefiting from the idea that the Fed would likely slowdown it monetary tightening.
  • This morning we are opening slightly weaker on the back of the news of a spike in Covid -19 related deaths in Hong-Kong and mainland China.
    • Authorities implementing more restrictions resulting in a drop in commodity prices as well as regional stock markets.
    • Traders, also preparing for the next FOMC meeting, with Fed speakers continuing to hammer a Hawkish message i.e. Bullard  & Brainard
    • All of this resulting in a “ weaker “ opening this Monday morning.
  • The overall picture though remains and INFLATION story, and recent data suggests that price pressures have eased,
    • Allowing for the FED to hike less than the 75bps it has done in the previous 4 meetings.
    • This will likely spur on risk taking and will be supportive of the entire Risk-complex.
    • i.e. Emerging market FX (like the ZAR) , Stocks and even Crypto .

Significant Market Data:


  • 21h45 : Fed governor James Bullard speaks ( a noted Hawk)


  • 10h00 : SA INFLATON YOY expected  7.4% VS 7.5% PREVIOUS
  • 10:00 : SA INFLATON CORE YOY expected 4.9% VS 4.7% PREVIOUS


  • 11H30 : SA PPI YOY expected  16.05% VS 16.3% PREVIOUS


  • The ZAR opening weaker on the back of  Risk off sentiment in Asia, following a spike of Covid-19 deaths in HK and China.
  • Chinese officials implementing new shutdowns spooking markets, especially commodities.
  • We opening at 17.3200 off Friday’s strongest level of 17.2000.
  • A Spike however allow for opportunities to SELL USDZAR.
    • US inflation remains the driver for future direction and the slow down we saw in CPI and PPI must not be ignored.
      • Comments from Atlanta Fed President Raphael Bostic said on Saturday that he is ready to “move away” from large rate hikes at the December meeting,
        • adding that another full percentage point of increase would be sufficient to rein in inflation.
  • Expect a weaker session for the earlier part of the week we head into the FOMC minutes as well as SARB rate decision on Thursday .
    • However, the Dollar likely to come under pressure on the back of lower rates and inflation.
    • The US10YT at 3.80%, well below the high’s of 4.20% printed indicating and expectancy of a “slower” Fed.
  • Trade : sell USDZAR at the top of the range

Expected Ranges

  • USDZAR :  Expect a range 17.0800-17.4700
    • Importers 17.2100-17.0800
    • Exporters 17.3400-17.4700
  • EURZAR :  Expect a range of 17.6600-17.9600
    • Importers 17.7600-17.6600
    • Exporters 17.8600-17.9600
  • GBPZAR :  Expect a range of 20.3400-20.6400
    • Importers 20.3400-20.4400
    • Exporters 20.5400-20.6400


  • USDZAR 17.3200
  • EURZAR 17.8000
  • GBPZAR 20.4900


  • Eskom reported it’s burned through almost R12 billion worth of diesel, double the amount it budgeted for this year.
    • It has been revealed that National Treasury and the department of Public enterprises are scrambling frantically to find more money for Diesel.
    • South Africans have been warned that power cuts would persist during the holiday season, and well into the new year.
    • Public Enterprises Minister Pravin Gordhan held an urgent meeting with Eskom Board members at the weekend.
    • The meeting on the back of serious concerns about the risk of higher levels of load shedding in the coming months. EWN
  • Scrap metal ban :
    • The government is set to introduce tighter measures to curb metal infrastructure theft.
    • This would possibly include the banning the export of scrap metal, despite objections by a number of stakeholders and the EU, a key trading partner.
    • On Friday, the cabinet said it had considered and approved a comprehensive package of measures to tackle the damage to public infrastructure and the economy by restricting trade in waste scrap and semi-processed metals.  Businessday
  • South Africa’s public sector wage bill is likely to balloon to nearly R700 billion, if a final wage offer averaging 7.5% by the ministry of public service and administration is implemented.
    • The hike to 7.5%, announced in a late-night statement on Thursday, seems to be a clear effort by government to try to avert a nationwide strike by public sector workers next Tuesday.



  • US stock futures slipped on Monday after the major averages posted their best weekly performances in months on softer-than-expected inflation data.
    • Lower CPI increased bets and bolstered the case for a less aggressive tightening campaign from the Federal Reserve. 
    • Last week, the S&P 500 rallied 5.9% for its best week since June and the Nasdaq Composite surged 8.1% for its best week since March.
    • This while the Dow gained 4.15% for the period.
    • Investors are betting that the Fed would moderate the size of their rate hikes to 50 basis points from December after a series of 75 basis point moves.
    • HOWEVER, pushing back was Fed Governor Christopher Waller, who warned that the central bank “still got a ways to go” in terms of the terminal rate.


  • The yield on the US 10-year fell sharply to 3.8%, the lowest in one month, after fresh CPI data came cooler than expected.
    • Consumer prices rose by 7.7% in October, slowing from the 8.2% in the prior month and below expectations of 8%.
    • Core inflation also surprised to the downside at 6.3%, easing pressure on the Federal Reserve to hike rates for an extended period as signalled in its November meeting.
    • Fed fund futures show that markets expect a 50bps rate hike by the Fed in December after four consecutive 75bps increases, while expectations for the terminal rate eased to 5%.


  • The Dow added 199 to 33,745
  • The SP500 added 18.78 to 3,965
  • The Nasdaq added 1.1 to 11,146


Asian markets lower this morning, following news of rising deaths and virus case loads in Hong Kong and China.

  • In Japan, the Nikkei 225 rose 0.16% to close at 27.945, but market caution capped gains as investors continued to grapple with rising global interest rates and growing recession risks.
    • Domestically, the BOJ Governor Kuroda recently stressed the need to maintain ultra-loose monetary policy to support the economy.
      • This even after Japanese Inflation surged to a 40-year high in October.
    • In corporate news, shares of Japan’s five biggest trading houses jumped after Warren Buffett’s Berkshire Hathaway increased stakes in each of these firms,
      • namely Mitsubishi Corp (2.2%), Mitsui & Co (0.2%), Itochu Corp (1%), Marubeni Corp (2.1%) and Sumitomo Corp (1.2%).
  • In Australia, the ASX 200 Index fell 0.17% to close at 7,139 on Monday, reversing gains from earlier in the session.
    • Traders citing losses in energy and mining stocks after resource stocks came under pressure from declining commodity prices
      • This on the back of concerns that China would tighten Covid curbs to arrest fresh outbreaks.
      • Investors continued to grapple with rising global interest rates that could tip the global economy into recession.  REUTERS

The US dollar index rose above 107 on Monday, approaching its strongest levels in over a week as Covid-related concerns in China prompted investors to dump risk assets and rush for the greenback’s safety.

  • The dollar was also underpinned by hawkish remarks from Federal Reserve officials,
    • with St. Louis Fed President James Bullard suggesting last week that the policy rate could reach the 5% to 7% range in order to bring down inflation
  • BUT, Atlanta Fed President Raphael Bostic said on Saturday that he is ready to “move away” from large rate hikes at the December meeting,
    • adding that another full percentage point of increase would be sufficient to rein in inflation.
  • Investors are betting that the Fed would deliver a more moderate 50 basis point rate hike in December, and a series of 25 basis point increases next year.
  • Markets now look ahead to minutes of the central bank’s November meeting, as well as a slew of US economic reports including consumer sentiment, durable goods and new home sales. FX NEWS

Brent crude oil  fell below $87 /bl on Monday. Prices falling for the fourth straight session amid concerns that China may tighten Covid curbs and that major central banks will continue raising interest rates.

    • China reported its first Covid-related deaths in almost six months over the weekend.
    • The government also implemented localized lockdowns in some areas as the world’s top crude importer continued to grapple with resurgent Covid outbreaks.
    • Investors were also worried that tightening financial conditions could tip the global economy into recession, hurting energy demand. GULF ENERGY NEWS

Gold prices weakened toward $1,740/oz, falling for the 4th straight session, weighed down by hawkish remarks from US Federal Reserve officials.

  • Officials signalled that interest rates could end higher than previously anticipated.
  • Most notably, St. Louis Fed President James Bullard said last week that the policy rate is not sufficiently restrictive and suggested that it could reach the 5% to 7% range in order to bring down inflation, higher than what the market is currently pricing.
  • Markets now look ahead to minutes of the central bank’s November meeting, as well as a slew of US economic reports including consumer sentiment, durable goods and new home sales. KITCO METALS REPORT

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