ZAR remains on edge ahead of Fed night or “Fright night”, the local unit opening at 18.5200.
The Rand remains at weaker levels following turmoil in the global banking sector and nervousness around tonight’s FOMC meeting.
- After the failure of SBV and the rescue of First Republic Bank and collapse of Credit Suisse, analysts encouraging the FOMC to hold rates.
- Goldman Sachs leading the calls for ZERO RATE HIKES to assist a fragile banking sector
- However, markets remain of the opinion that the FED will hike 25 bps, and mention their injection of liquidity in the system.
- In addition the acquisition of Credit Suisse by UBS via stock swap and funding from the SNB, have left CS bond holders incensed, who have basically seen the value of their debt written down to zero.
- Cross Atlantic lawsuits being prepared as DEBT is usually preferred of Equity on a balance sheet in the event of a collapse.
- All of this adding, to more uncertainty and focus on the Fed’s decision this evening.
- Locally, Monday’s EFF national shutdown, not adding to market volatility as the FED remains the most important data point on the calendar.
- Bond yields rebounding as investors bet on a prudent Fed, as investors returned to acquire risk assets.
- The SP500 higher and the Dollar Lower.
- The US10YT at 3.52%
- The Dollar 103.19
- The SP500 4000
Data this week
- 09H00 UK INFLATION 9.8% EXPECTED YOY VS 10.1% PREVIOUS
- 09H00 UK CORE INFLATION 5.8% EXPECTED YOY VS 5.8% PREVIOUS
- 10h00 SA INFLATION 6.9% EXPECTED VS 6.9% PREVIOUS YOY
- 10h00 SA CORE INFLATION 5.0% EXPECTED VS 4.9% PREVIOUS YOY
- 10H45: ECB LAGARDE SPEAKS
- 20H00 : US FED FOMC RATES DECISION – EXPECTED + 25BPS
- FED FUNDS 4.75% TO 5.00% ( VERY CLOSE TO TERMINAL)
- 20H30 : FED PRESSER : JEROME POWELL ADDRESSES THE MEDIA
- 14H00 : UK BANK OF ENGLAND RATES DECISION +25 BPS 4.00% TO 4.25%
- 14H30 WEEKLY US JOBLESS CLAIMS 193K EXPECTED VS 192K PREVIOUS
- 14H30 US DURABLE GOODS EXPECTED +1.2% VS -4.5% PREVIOUS
Market Movement Today:
The ZAR remains under pressure, opening around the 18.5000 level in early Wednesday trading.
- The local unit not joining the Risk rally, ahead of the FED’s key FOMC rate decision tonight.
- Markets on edge, as some call for zero hikes and others for 25bps.
- The banking crises, front and centre, and throw elevated inflation, and we can all see the conundrum the Fed faces.
- Analysts of the opinion the FED and US treasury would prefer to stave off another 2008’s global liquidity crises.
- And so the discussions would likely favour a more dovish Fed than expected , less than 2 week ago.
- The markets had priced for 50 bps following the January jobs report, but since then, lower inflation followed by the collapse of 3 US Banks,
- Have changed sentiment in the markets.
- NB: The ZAR does not perform well in uncertain environments, and this is reflected in its current price level.
- Earlier, this morning UK inflation surprised to the upside, and this all adds more uncertainty to the Fed’s decision.
- We expect subdued ranges ahead of the decision, expecting 25 bps.
- The press conference at 20h30 becoming key, as markets on edge to hear Jerome Powell speak for the first time.
Trade : We encourage importers to cover short term commitments, as the trend remains for a weaker ZAR, until
The dust settles, where we expect lower interest rates in H2 of 2023 and a weaker dollar.
- USDZAR : Expect a range 18.4500-18.6300
- Importers 18.5700-18.6300
- Exporters 18.5100-18.4500
- EURZAR : Expect a range of 19.8900-20.0400
- Importers 19.9400-19.8900
- Exporters 19.9900-20.0400
- GBPZAR : Expect a range of 22.5800-22.7300
- Importers 22.6800-22.7300
- Exporters 22.6300-20.5800
- USDZAR 18.5300
- EURZAR 19.9500
- GBPZAR 22.6500
EFF marches to demand president’s resignation
- In the commercial hub of Johannesburg, many shops were shuttered and businesses closed in anticipation of possible looting.
- Thousands marched through the streets of South Africa’s cities on Monday to demand that President Cyril Ramaphosa resign, as security forces guarded malls and roads to prevent violence and looting.
- The EFF party, whose supporters feel marginalised had called for a national shutdown. EWN
OUTsurance Group reported on Wednesday an almost three-fold jump in half-year profit, helped by strong growth in premiums and favourable operating conditions.
- The company’s headline earnings per share, a profit measure, was 86.6 South African cents in the six months to December 31, up from 35 cents a year ago.
- It declared a dividend of 56.8 cents per share.
- OUTsurance, which provides cover for vehicles and homes and as well as small- and medium-sized businesses, had managed to recover following a tough two years, driven by Covid-19-led claims.
- However, rising interest rates are making premiums more expensive and customers strained, making the outlook cloudy for insurance firms. Moneyweb
New electricity minister Ramokgopa ‘hits the ground sprinting,’ as he visits all Eskom power stations
- On the day Eskom announced that load shedding would be suspended,
- new Minister of Electricity Ramokgopa began his tour of all Eskom’s power stations, finding that the problem lies in technical issues and the solution will be found in the workers. News24
- Regular trading on Tuesday, the Dow rose 0.98%, the S&P 500 gained 1.3% and the Nasdaq jumped 1.58%, with all three benchmarks rising for the second straight day.
- Eight out of 11 S&P sectors finished higher, led on the upside by energy, consumer discretionary and financials.
- Banks soared after Treasury Secretary Yellen said the US will continue to protect depositors past FDIC insurance thresholds should bank runs resurface.
- US stock futures held steady on Wednesday as investors prepared for a key Federal Reserve policy decision.
- It is expected to raise interest rates less aggressively in light of easing inflationary pressures and the recent banking crisis.
- Futures contracts tied to the three major indexes were all trading near breakeven.
- Investors were hopeful that the worst of the banking turmoil is over, while expecting a dovish messaging from the Fed on Wednesday. Reuters
- US bonds yield recovered, with the US 10 Year Yield at 3.57 % according to over-the-counter interbank yield quotes for this government bond maturity.
- Investors remain on edge ahead of tonight’s FOMC rate decision.
- Inflation and the banking sector turmoil remains key following the collapse of Silicon Valley Bank and New York Signature Bank.
- Also , First Republic Bank received a lifeline from large US banks, and Credit Suisse was taken over by UBS. CNBC
- The Dow rallied 316 to 32,560
- The SP500 gained 51 to 4,002
- The Nasdaq added 184 to 11,860
image: Trading economics
The US dollar
- The US dollar held below 103.5 on Wednesday, close to its lowest levels in five weeks, amid growing expectations that the Federal Reserve would adopt a more cautious policy approach on interest rates later in the day.
- The central bank is projected to deliver a more moderate 25 basis point rate hike, with some analysts betting on a pause.
- Such expectations came on the heels of a global banking crisis that prompted regulators and major lenders to help stabilize markets.
- In the span of 2 weeks, tech startup-focused Silicon Valley Bank and New York Signature Bank collapsed, First Republic Bank received a lifeline from large US banks, and Credit Suisse was taken over by UBS.
Meanwhile, to ensure global dollar liquidity, the Fed offered daily currency swaps to BoC, BoE, BoJ, ECB, and SNB. Forex News
- Asian markets all higher on the back of a strong performance on Wall Street. Investors hoping that the worst of the banking crisis is over and expectations that the Fed will tighten policy less aggressively.
- Treasury Secretary Yellen said the US would be willing to take further action to protect deposits.
- Shares in Australia, Japan, South Korea, Hong Kong and mainland China all advanced.
- In Japan, the Nikkei 225 jumped 1.93% to close at 27,467, erasing losses from earlier in the week and tracking Wall Street higher.
- Analysts citing hopes that the worst of the banking turmoil is over and expectations that the Fed will tighten policy less aggressively.
- while the Fed is expected to deliver a more moderate 25 basis point rate hike in light of easing inflationary pressures and the recent banking crisis.
- All other sectors advanced as well, with notable gains from index heavyweights such as Toyota Motor (1.9%) and SoftBank Group (2.8%). Reuters
- US WTI crude futures traded below $69/bl l as investors continued to assess the demand outlook against the backdrop of easing concerns over the global banking crisis and expectations that the Fed will adopt a more cautious policy approach.
- The US oil benchmark gained about 4% over the past two sessions as US Treasury Secretary Janet Yellen said the government would be willing to take further action to protect deposits,
- while the Fed is expected to deliver a more moderate 25 basis point rate hike in light of easing inflationary pressures and the recent banking turmoil.
- The market also remained bullish on the outlook for top crude importer China, with the IEA stating recently that the country is expected to drive a 2 million barrel rise in daily global oil demand this year.
- On the supply side, Russia Deputy Prime Minister Alexander Novak said the country has decided to keep its output at a reduced level through June, taking into account the current situation. Gulf Energy News
- Gold held around $1,940/oz in subdued trade on Wednesday as investors cautiously awaited the US Federal Reserve’s interest rate decision.
- The metal lost more than 2% over the past two sessions, retreating sharply from one-year highs as easing concerns about a wider banking crisis dampened demand for safer assets.
- Treasury Secretary Janet Yellen said the US government would be prepared to take further actions to protect depositors should bank runs resurface.
- The Fed is also widely expected to extend its tightening campaign on Wednesday’s policy decision, with money markets firmly pricing another 25 basis point rate increase.
- Elsewhere, markets await UK inflation data on Wednesday ahead of the Bank of England’s policy decision on Thursday. Kitco metals