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Morning NOTE

22 September 2022


The ZAR traded in a wide range following the FOMC rates decision, closing near the weakest end of its range at R17.7500/$.


  • The Rand traded in a wild range after the FED raised rates by 75 bps and upped its guidance on the neutral rate to 4.60% from 3.80%.
    • The hike was the 3rd time the world’s largest central bank opted for a 75 bps hike as inflation remains stubbornly high.
    • It was also the 5th consecutive rate hike, and pushing borrowing costs to the highest since 2008.
    • The central bank also signalled larger increases to come in new projections showing its policy rate rising to 4.40% by the end of this year before topping out at 4.60% in 2023.
  • Like all risk assets the ZAR retreated after, briefly testing 17.5200 on the back of an algo induced stop hunt.
    • The US 2 YT hit 4.10%, increasing the inversion spread vs the US10YT, as markets continue to price for a pending recession.
  • Today, we have the SARB and it is vital that the SARB match the FED, to slow down the decline in the ZAR.
    • The USD index hitting 111, the highest since June 2002, indicating the strength of the USD trend and also the power of the FED.
  • Earlier in the session, SA inflation reported as expected at 7.6%, lower than the 13year high of 7.8%.
    • It is however above market expectations of 7.5% and the upper limit of the South African Reserve Bank’s target range of 3%-6%. 
  • ***The Swiss Central also delivered with a 75 bps hike (the Swiss moving from negative rates to positive is significant).
    • -0.25 % PREVIOUS TO +0.50%

Significant Market Data


    • **  REPO FROM 5.5% TO 6.25%, PRIME FROM 9% TO 9.75%




  • After a rejection of 17.5200 on the back of stop hunts, the ZAR finds itself weaker at 17.7500 ahead of today’s SARB rate decision.
  • The market has priced in 75 bps with the repo expected, to move from 5.5% to 6.25%.
    • Moving the SA prime from 9% to 9.75%
  • The theme however remains a hawkish FED and a rampant Dollar.
  • We expect the ZAR to continue on this path  with some profit taking ahead of the MPC.
  • Some market insider info : Foreign Bond holders, traditionally BUY USDZAR as a hedge ahead of the MPC to protect Bond asset values.
    These positions usually gets unwound after the decision.

And we continue to stress ;

  • The ZAR remains vulnerable due to local ESKOM power cuts, but more significantly, Global Central Bank Rate decisions.
  • For now markets all cautious, ahead of the FED, and highly unlikely we see large ZAR gains this session.

  • Trade :  BUY USDZAR

Expected Ranges

  • USDZAR :  Expect a range 17.5200-17.9300
    • Importers 17.6600-17.5200
    • Exporters 17.8000-17.9300
  • EURZAR :  Expect a range of 17.2800-17.6200
    • Importers 17.3900-17.2800
    • Exporters 17.5000-17.6200
  • GBPZAR :  Expect a range of 19.8000-20.1800
    • Importers 19.8800-19.8000
    • Exporters  20.0200-20.1800


  • USDZAR 17.7600
  • EURZAR 17.4300
  • GBPZAR 19.9400



  • Efficient Group chief economist, Dawie Roodt, says consumers should brace for another massive interest rate hike.
    • The South African Reserve Bank (SARB) is expected to announce the interest rates on Thursday following a meeting by the Monetary Policy Committee.
    • The latest announcement comes amid attempts to tame inflation.
    • Roodt expects the reserve bank to hike the interest rates by 75 basis points or 100 basis points. EWN
  • Former President Thabo Mbeki has placed blame for this and other problems, including the ailing economy, on a lack of quality leadership in both government and society.
    • This as President Cyril Ramaphosa and his government continue struggle in solving the crisis at Eskom. News 24
  • Business Unity South Africa (Busa) has made an urgent plea for government to step in and take certain measures.
    • Busa has highlighted a number of measures, including a short-term plan.
    • The idea is to urgently enable Eskom to purchase power from all available resources and to step up repairs to plants. IOL


  • The Dow lost over 500 points in a volatile session on Wednesday, and the S&P 500 and the tech-heavy Nasdaq tumbled roughly 1.8% each.
    • Traders digested the FOMC’s rate decision and Powell’s gloomy outlook for the economy.
    • The Fed delivered a 75 bps rate hike for a third consecutive meeting while signalling further increases in the next few months.
    • The terminal rate, the peak spot where the federal funds rate is, is now seen at 4.6%, with policymakers anticipating cutting interest rates in 2024 and extending that into 2025.
    • Officials also significantly cut their outlook for 2022 economic growth, expecting just a 0.2% gain in GDP, down from 1.7% in June.


  • The US 10-year Treasury yield briefly broke above the 3.61% mark for the first time since April 2011 before consolidating around 3.5%.
    • This after the Federal Reserve ratcheted up its campaign against inflation by raising its federal-funds rate by 0.75 percentage points.
    • The terminal rate, the peak spot where the federal funds rate is, is now seen at 4.6%, with policymakers anticipating cutting interest rates in 2024 and extending that into 2025.
    • Officials also significantly cut their outlook for 2022 economic growth, expecting just a 0.2% gain in GDP, down from 1.7% in June.
  • Adding to market nerves were the 2-year Treasury yield surged above 4.1%, the highest since 2007.


  • The Dow declined  522 to 30,183
  • The SP500 66 points to 2,789
  • The Nasdaq  fell 204 to 11,220


  • Asian markets all traded lower across the region following a hawkish Fed who once again hiked 75 bps.

    • This was followed by more hawkish guidance by Jerome Powell.
      • In Japan, the Nikkei 225 fell 0.58% to close at 27,154, hitting their lowest levels in over two months and tracking losses on Wall Street.
        • The US Federal Reserve delivered another large interest rate hike and signalled further increases ahead.
          • Investors also digested the Bank of Japan’s policy decision after it maintained ultra-low interest rates and remained dovish in its outlook.
        • This decision defying a global wave of policy tightening and risking further yen depreciation and capital outflows resulting in a sharp drop in the YEN.
      • In Australia, the ASX 200 fell 1.56% to close at 6,700 on Wednesday, hitting its lowest level in two months and taking cues from a weak overnight session on Wall Street.
        • The RBA announced it was looking to slow the pace of rate hikes, whereas the FED stayed the course, resulting a rampant dollar vs the Aussie.
  • The Dollar index surged to as high as 111.5 on Wednesday, a new high since June 2002.
    • The rally after the US Federal Reserve raised benchmark interest rates by another 75 bps and indicated it will keep hiking well above the current level.
    • The federal funds rate is now at its highest since early 2008, and new projections show it reaching 4.4% by the end of 2022 before topping out at 4.6% in 2023.
    • The currency today received an extra boost from safe-haven flows after President Putin announced a partial military mobilization in Russia, in a significant escalation of the conflict in Ukraine. Bloomberg
  • The Euro tumbled more than 1% to below 0.9833, hovering around its weakest level since 2002.
    • The Fed rate hike weighing on the single currency as the rate gap widens.
    • The ECB raised interest rates by an unprecedented 75 bps in September, and is expected to deliver between a 50- and a 75-bps rate hike in October despite recessionary risks.
    • The bloc has been grappling with an unprecedented energy crisis and a recession looks almost inevitable to analysts, although the central bank steered clear of suggesting that a contraction may take place.
    • The region is under even more pressure after Russian President Vladimir Putin announced a partial military mobilization in Russia, a move that is seen as an escalation by the West. Reuters
  • Crude oil WTI  bottomed near $83 /bl, and a dramatic reversal from its daily highs of $86.6 as investors weighed a weakening global economic outlook after  the Fed’s rate decision.
    • This was exacerbated by a stronger dollar against tighter supplies from Russia and OPEC.
      • Fears mount that an aggressive tightening from major central banks worldwide would derail global growth and dampen energy demand.
      • After President Vladimir Putin announced a partial military mobilization in Russia, placing a floor under prices were concerns of further supply disruptions.
        • In other news, EIA data showed that the US crude oil inventories rose 1.142 million barrels last week, below market expectations of a 2.161 million increase. Gulf energy news

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