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Morning NOTE

22 November 2022


The ZAR range traded ahead of this week’s FOMC minutes as well as Thursday SARB MPC rate decision.


  • The Rand continued to trade inside last week’s range and settled between 17.2100-17.4200 .
    • This morning we opening at 17.3200.
  • Yesterday, after some early weakness induced by Covid-19 concerns out of China, markets swiftly reset and continued to focus on the elephant in the room i.e. Inflation and interest rates.
  • With the FOMC minutes looming large on Wednesday, traders are once again focused on the language in the minutes.
    • And if we once again hear, “ following the data“, then this could be seen as dovish and we can expect a RISK ON environment.
      • The Fed is widely expected only hike 50 bps in December, following the 4 consecutive 75 bps hikes.
      • Markets betting that 2023, could see smaller hikes of only 25 bps.
  • Locally, the SARB MPC sits for the last time this year and the markets are pricing in another hike of 75bps.
    • This would be ZAR supportive as the SARB has maintained its rate advantage vs the US Dollar.
    • With SA inflation data also due this week, expect some volatility, but the focus will remain on the Fed and FOMC.
  • Eskom at stage 4 leaning into 5, not affecting ZAR sentiment.

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 inside yesterday’s range and comfortably trading around the 17.3000 handle also seen as the point of control.
    • NB: It would take “NEW” information to drastically move the market away from this point.
  • The opening indicates a market with little conviction, and we are likely to trade the range again this session.
    • Last week’s 17.5600 and 17.1000 likely to remain in tact.
  • Risk events :  SA CPI on Wednesday with US FOMC minutes at 9pm and SARB MPC rate decision on Thursday.
    • Also, Markets continue to be Risk positive following lower than expected US Inflation data last week.
  • Trade : USDZAR : Range trading ,
    • EXPORTERS : sell above 17.4000 towards 17.5000 &
    • IMPORTERS :Buy 17.2600 TOWARDS 17.1600

Expected Ranges

  • USDZAR :  Expect a range 17.1600-17.4600
    • Importers 17.2600-17.1600
    • Exporters 17.3600-17.4600
  • EURZAR :  Expect a range of 17.6300-17.8500
    • Importers 17.7100-17.6300
    • Exporters 17.7700-17.8500
  • GBPZAR :  Expect a range of 20.3900-20.6000
    • Importers 20.4600-20.3900
    • Exporters 20.5300-20.6000


  • USDZAR 17.3100
  • EURZAR 17.7500
  • GBPZAR 20.5000



  • The Public Servants Association of South Africa said it will be stepping up its pressure on the government on Tuesday over wages
    • Workers expected to stop working demanding a better deal.
    • Government departments from Home Affairs to licensing departments are expected to see disruptions.
    • Last week saw the government stand firm on its final offer but this was met with anger from unions.
    • Three federations Cosatu, Saftu and Fedusa have joined forces to ensure that the government honours its 2018 wage agreement. EWN


  • Former president Jacob Zuma and ex-prison boss Arthur Fraser’s leave for appeal over Zuma’s medical parole decision was on Monday dismissed with costs.
    • RECALL : Last June, the Constitutional Court found Zuma in contempt of a previous order it had handed down,
      • directing him to appear before the State Capture Commission of Inquiry for questioning.
      • He was sentenced to 15 months behind bars. News24


  • Eskom said on Sunday that it has run out of cash to buy diesel and does not plan to order any more until 1 April 2023. 
    • The consequence of this will be extreme levels of load shedding not yet experienced in SA. 
    • At a state of the system briefing last week, Eskom chief operating officer Jan Oberholzer said that since 1 April,
      • Eskom has spent R12 billion on diesel against an initial budget of R6.1 billion.
      • This was later revised to R11.1 billion. 
      • Oberholzer said, “If we continue to burn diesel the way we have for the past seven months, the cost would be astronomical.
      • But we do not have the cash to spend. We would be able to pay if the municipalities were paying us,” said Oberholzer at the time.  NEWS24


  • US stock futures were little changed on Tuesday as investors remain cautious ahead of Federal Reserve meeting minutes that could offer clues on the trajectory of US rate hikes.
  • Traders all but ignoring the Covid situation in China.
  • Futures contracts tied to the three major indexes were all trading near breakeven.
  • Yesterday, the Dow shed 0.13%, while the S&P 500 and Nasdaq Composite lost 0.39% and 1.09%, respectively.
    • Investors now look ahead to more Fed appearances, economic and earnings reports
    • The key being the FOMC MINUTES ON WEDNESDAY.


  • The yield on the US 10-year Treasury note was around 3.8%, well below 4.2% touched early in the month.
  • Traders await the FOMC minutes release on Wednesday for more clues on the Fed’s next rate hikes.
  • Fed policymakers have been trying to push against the dovish narrative from markets, with many officials signalling rates would go higher than projected in September.
  • Most investors now bet on a 50bps hike in the fed funds rate to the 4.25%-4.50% range in December.
  • The US bond market will be closed on Thursday for the Thanksgiving holiday and will close early on Friday.


  • The Dow fell 45 to 33,700
  • The SP500 fell 15 to 3,949
  • The Nasdaq fell 121 to 11,024


  • Asian Markets mixed as investors await the FOMC minutes as well as Covid-19 news out of China.
    • In Japan, the Nikkei 225 climbed 0.61% to 28,116, extending gains from the previous session, with nearly all sectors finishing in positive territory.
      • Still, investors remain cautious ahead of US Federal Reserve meeting minutes that could offer clues on the trajectory of US rate hikes, while monitoring the Covid situation in China.
      • Strong gains were seen from automakers, healthcare and commodity-linked firms such as Toyota Motor (2.4%).
        • In corporate news, Shionogi jumped 2.8% following reports that Japan’s regulatory agency confirmed possible efficacy of the firm’s Covid-19 drug.
    • China and Covid-19
      • The yield on China’s 10-year government bond was around 2.82%. Yields lower after disappointing economic data including falling retail sales and slowing industrial production for October.
      • Coupled with big cash injections from the PBoC helped to prevent the yields to rise further.
      • Early this month, President Xi Jinping signalled he will stop the economy from spiralling and the government announced an ease of some Covid Zero policies.
        • a rescue package for the property sector while moving to cool tensions with the US, which boosted risk sentiment and triggered a bond sell-off. Reuters
  • The US dollar fell to 107.5, giving back some gains from the previous session. Traders citing nerves ahead of the  latest Fed meeting minutes that could guide the outlook for US rates.
    • Traders also parsed through various remarks from Fed officials who have largely maintained a strong commitment to bring down inflation.
    • Although mostly hawkish rhetoric, it is important to note that Fed Governor Raphael Bostic indicated he sees another 100 bps before a pause.
      • He cited the lagging effect of monetary policy (18 months) and that the FED has been quite aggressive in trying to get ahead  or bringing inflation under control.
      • The Buck slipped across the board, with the most pronounced selling versus the kiwi ahead of the Reserve Bank of New Zealand’s policy decision. FX NEWS
  • Yen worries continue
    • The Japanese yen weakened past 141/$, hitting its lowest levels in over a week.
      • The Yen weighed down by a strong dollar as Fed officials reiterated their commitment to bringing down inflation.
      • However, BOJ Governor Kuroda also stressed the need to maintain ultra-loose monetary policy to support the economy;
      • This in spite of another hot inflation reading, with annual core consumer prices in Japan surging to a 40-year high of 3.6% in October.  FX news
  • US Crude oil WTI trading sideways around $80/bl as traders worry about demand concerns against supply-side uncertainties.
    • On Monday, the US oil benchmark dropped to as low as $75.27 for the first time since January following a report that OPEC+ was considering an output increase next month.
      • However the Saudi’s swiftly denied the news
        • The Saudi Energy Minister also signalled that they are ready to reduce production further to balance supply and demand .
        • Meanwhile, the demand outlook remains mired by resurgent virus outbreaks in top crude importer China that prompted authorities to reinstate some Covid restrictions.
        • Investors also contended with the prospect of even tighter financial conditions after US Federal Reserve officials reiterated their commitment to fighting inflation.  Gulf energy news
  • Gold rose above $1,740 an ounce on Tuesday, snapping a four-day decline as the dollar pulled back from a recent high.
    • Traders waiting for the latest FOMC meeting minutes that could guide the outlook for future US rate hikes.
    • Traders also parsed through various remarks from Fed officials, with San Francisco Fed President Mary Daly warning against overtightening (Gold supportive).
      • while Cleveland Fed President Loretta Mester said she wants to see inflation come down sustainably before supporting a pause.
      • Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal. Kitco metals report .

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