The ZAR strengthened on the back of profit taking ahead of multiple central bank rate decisions this week.
Significant Market Data
- 10H00 : SA INFLATION 7.5% YOY EXPECTED VS 7.8% PREVIOUS YOY
- 10H00 : SA CORE INFLATION 4.7% YOY EXPECTED VS 4.6% PREVIOUS YOY
- 20H00 : US FED RATE DECISION +75 BPS EXPECTED – FED FUNDS MOVING FROM 2.5% TO 3.25%
- 20H30 : US FED CHAIR ADDRESSES THE MEDIA
** Jerome Powell’s language will once again be under intense scrutiny for future rate hikes.
- 09H30 : SNB ( SWISS CENTRAL BANK) +75 BPS. ( ** the Swiss moving from negative rates to positive is significant).
- NB -0.25 % PREVIOUS TO +0.50%
- 13H00 : BOE MPC RATE DECISION +50 BPS EXPECTED
- 15H00 : SARB MPC RATE DECISION +75 BPS EXPECTED
- ** REPO FROM 5.5% TO 6.25%, PRIME FROM 9% TO 9.75%
- 20H00 : US FED CHAIR JEROME POWELL SPEECH
- This morning we are once again opening inside yesterday’s range (17.8100-17.6100).
- AND, the open (17.7200) continues to point to a market that lacks directional conviction.
- Traders not initiating any large directional trades ahead of tonight’s FED decision, with market makers hunting easy stop loss orders on both sides of the range.
- BUT… the bias remains to the weak side for the ZAR and it remains a BUY USD market.
NB: We encourage both importers and exporters to hedge at least 50% of their short term exposures ahead of tonight’s decision.
- USDZAR : Expect a range 17.5600-17.8600
- Importers 17.6600-17.5600
- Exporters 17.7600-17.8600
- EURZAR : Expect a range of 17.5000-17.7600
- Importers 17.5600-17.5000
- Exporters 17.6600-17.7600
- GBPZAR : Expect a range of 19.9800-20.2800
- Importers 20.0800-19.9800
- Exporters 20.1800-20.2800
- USDZAR 17.7100
- EURZAR 17.6200
- GBPZAR 20.1500
- The reaction and fallout because of the latest power crisis continued in Parliament on Tuesday.
- Opposition parties have not only called for the Eskom leadership to be axed, they’ve also singled out Minerals and Energy Minister Gwede Mantashe.
- There are also calls for a change in the country’s energy policy and the removal of certain legal requirement to supply energy.
- The DA said that Minister Mantashe should take the fall while the EFF said that Andre de Ruyter and the entire Eskom board should be fired. EWN
- ESKOM however announced stage 5 is likely to continue as it struggles to bring failed units back online to support the grid.
- It has since emerged that the country was close to stage 7 on Monday. IOL
- Public service labour unions have been issued a certificate allowing them to embark on a legal strike, after failing to break a wage impasse with the Public Service Coordinating Bargaining Council (PSCBC).
- The unions, which include the South African Policing Union (SAPU) on Tuesday held conciliation talks with CCMA commissioner in a bid to resolve the wage deadlock.
- Government has stuck to its 3% offer, which unions have rejected. NEWS 24
- In regular trading on Tuesday, stocks reversed Friday’s gains, where the Dow fell 1.01%, the S&P 500 dropped 1.13% and the Nasdaq Composite lost 0.95%.
- The drops bringing all three benchmarks closing at their lowest levels in 2 months.
- All S&P sectors declined, led by real estate, materials and consumer discretionary
- This morning futures were little changed as investors moved to the side-lines ahead of a key Federal Reserve decision.
- Stocks reversed gains from earlier this week as the Fed is expected to signal its firm commitment to fighting inflation, while the third quarter earnings season also loomed over the markets.
- The US 10YT yield touched 3.59%, the highest since April of 2011, as the 2-day FOMC meeting kicks off.
- The Fed is widely expected to deliver another 75bps rate hike while bets of a full point increase have scaled back.
- Investors will also keep a close eye on the so-called dot plot for projections on where rates may go later this year and next year.
- Meanwhile, the yield on 2-year note topped 3.98%, the highest since November of 2007 .
- On Monday, the yield curve between two-year and 10-year notes inverted as far as negative 48 basis points.
- An inversion in this part of the yield curve is usually seen as an indicator that a recession will follow in one to two years. Source : US treasury
- The Dow fell 313 to 30,706
- The Nasdaq declined 109 to 11,425
- The SP500 fell 43 to 3,855