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Morning NOTE

 24 February 2023


The ZAR strengthened after a benign Q4 US GDP report that printed lower than expected.


The Rand joined markets in a relief rally after US GDP disappointed markets with a lower than expected data print.

  • The US economy expanded an YOY 2.7% on quarter in Q4 2022, slightly below 2.9% in the advance estimate.
  • Consumer spending rose 1.4%, the least since Q1 2022 and below 2.1% in the advance estimate.
  • Spending on goods went down 0.5%, revised from an initial estimate of a 1.1% rise and
  • spending on services went up 2.4%, also below 2.6% in the advance estimate. source: U.S. Bureau of Economic Analysis
  • The local unit gaining more than 1% following the data release.
    • Markets priming for a higher number that would effectively support the Fed’s hawkish narrative.
    • But , It appears the lagging effect of monetary tightening continues to show its head and something officials are choosing to ignore.

Expectations vs reality?

  • Markets continue to miss expectations priced into the data (illustrating how poor economists really are at predicting)
    • i.e. transitory in 2020 to 2021 and most recent glaring data misses.
    • The result are extremely volatile price actions .


  • Inflation continues to trend downwards
  • The job market remains tight, but weekly claims remain around 200k
  • US GDP was lower than previously recorded, indicating a slowdown in the economy .
    • A recession remains priced into the 2v10’s treasury spread.
  • The GDP miss, reflected in the US 10YT yield declining to 3.86% from previous 3.95%
    • The Dollar index also lower at 104.20
    • And the SP500 back above 4000
    • The ZAR also off its weakest levels to hover around the 18.2000 mark.

Today we look forward to the Fed’s preferred inflationary gauge, the PCE (personal consumption expenditure).
A lower number likely to slow down the risk asset selloff.

Data this week 



Market Movement Today:

  • The ZAR  on opening stronger this Friday morning, following a benign overnight trading session,
    • The local unit hovering around the 18.2000 level, with  recent economic(risk) events in favour of the local unit.
  1. The SA budget was favourably received by the markets
  2. US GDP was softer than expected.
    1. All of this against last week’s slew of inflationary data.  
  • Today’s PCE like to create more volatility and a miss to the topside likely to cause more market turbulence.
    • The ZAR off its weakest levels but remaining vulnerable to US inflation data.
    • The fed remains committed to raise rates and bring down inflation back to 2%.
  • Trade :  remains for short term importers to exact cover and exporters to utilise both FX options and FEC’s.

Expected Ranges:

  • USDZAR :  Expect a range 18.1400-18.2900
    • Importers 18.1900-18.1400
    • Exporters 18.2400-18.2900
  • EURZAR :  Expect a range of 19.2200-19.4000
    • Importers 19.2800-19.2200
    • Exporters 19.3400-19.4000
  • GBPZAR :  Expect a range of 21.7900-22.0000
    • Importers 21.8600-21.7900
    • Exporters 21.9300-22.0000


  • USDZAR 18.2200
  • EURZAR 19.3100
  • GBPZAR 21.8900



  • Following the dramatic exit of former CEO André de Ruyter, Eskom has appointed Calib Cassim as its interim group CEO.
    • Cassim served as the embattled power utility’s chief financial officer in November 2018.

Interview fallout

  • Several senior ANC leaders are fuming following former Eskom CEO Andre de Ruyter’s scathing criticism of the party and placing it at the centre of corruption claims at the entity.
    • De Ruyter’s sit-down with e-TV’s Annika Larsen has continued to cause upset for many in the governing party;
    • including those who felt they had elevated him to the position of the power producer’s saviour.

More bad weather

  • Parts of South Africa are likely to feel the impact of a tropical storm, currently moving over Madagascar, this weekend.
    • Provinces recovering from widespread flooding have been warned to brace for more, as it brings heavy rain.
    • Cyclone Freddy, recently downgraded to a tropical storm, is likely to bring significant rainfall and the chance of flooding to the north-eastern parts of the country.
      • Parts of Limpopo, Mpumalanga and KwaZulu-Natal are expected to be the worst affected.


  • US equity futures fell slightly on Friday after Wall Street closed higher in a volatile session overnight.
  • Investors awaited the January data on US personal income and consumer spending.
    • Sentiment among traders remained fragile, amid worries about the pace of future rate hikes in the face of contradictory economic signals recently.
  • Meantime, the strain in US-China relations likely deepened after Bloomberg News said Washington is increasing its small contingent of troops in Taiwan to train local forces.
  • Major averages in the US are heading for a weekly fall, with the S&P 500 on its way to its worst week since Dec.16th.
    • the Dow is set to its fourth straight losing week, and the Nasdaq is on pace for its 2d negative week


  • The yield on the US 10-year declined to 3.86% after rising past the 3.95% mark on Thursday.
    • It was to reach its highest in over three months amid further expectations that the Federal Reserve will raise its funds rate to a higher level for a longer period of time.
      • The core PCE price index was revised to show a softer slowdown than previously anticipated in the fourth quarter.
    • However, downward revisions to the US GDP limited the rally for bond yields.
      • The data comes shortly after the release of minutes from the FOMC’s latest meeting,
    • which showed that policymakers want interest rates to remain at a restrictive level until inflation is clearly on a path to 2%.


  • The Dow added 108 to 33,153
  • The SP500 added 21 to 4,012
  • The Nasdaq added 83 to 11,590

:  image: Trading economics


The US Dollar

  • The dollar index was little changed at 104.6 on Friday, remaining near its highest level in seven weeks.
  • The buck pointing to the fourth straight week of gains, amid a resilient US economy that supported the case for further monetary tightening from the Federal Reserve.
  • The latest FOMC meeting showed that Fed officials noted that upside risks to the inflation outlook remained a key factor shaping the policy outlook
  • Also that interest rates would need to move higher and stay elevated until inflation is clearly on a path to 2%.
  • Elsewhere, St. Louis Fed President James Bullard said recently the central bank still needs a “sharp” tightening to tame high inflation. Fx news

Asian markets higher across the region .

  • In Japan, the Nikkei 225 soared 295 points or 1.1% to 27,399, amid reports that the incoming governor of Bank of Japan Kazuo Ueda is testifying before a lower house committee today.
    • Believing that it was appropriate to maintain an ultra-loose monetary policy as inflation in Japan has yet to meet the central bank’s target of 2%.
      • Ueda also mentioned there are various possibilities for the future of yield curve control.
    • In the US, stocks ended a volatile session Thursday in positive territory, with the S&P 500 snapping a four-session losing streak,
      • as investors tried to figure out what the Fed will do with interest rates in the coming months. 
  • The Japanese yen weakened toward 135 per dollar, hitting its lowest levels in two months .
    • Traders citing stronger-than-expected US economic data and hawkish remarks from policymakers.
    • All this bolstered expectations the Federal Reserve would keep raising interest rates to tame inflation.
    • Investors also continued to assess the implications of Kazuo Ueda’s nomination as the next Bank of Japan governor .
    • He already stated that the central bank’s current ultra-easy stance “is appropriate” and “needs to be continued,”
      • This  countering speculations about normalizing policy. Reuters

Crude oil

  • Brent crude futures were up 0.74% to near $83 on Friday.
  • Prices  advancing for the second day, supported by expectations for lower Russian production.
  • Moscow plans to cut oil shipments from its western ports by up to 25% in March from February.
  • It will be exceeding its announced production cuts in an attempt to lift prices for its oil, Reuters said Thursday.
  • For the week, however, Brent oil fell slightly, rattled by rising US stockpiles. Gulf energy news


  • Gold held its recent decline to below $1,830/oz on Thursday, hovering near its weakest levels in 8 weeks.
  • Minutes from the Federal Reserve’s last meeting showed that policymakers largely agreed to keep fighting inflation with more interest rate hikes.
  • The minutes stated that inflation “remained well above” the Fed’s 2% target and the labour market “remained very tight.
  • A major contributing  factor to continuing upward pressure on wages and prices.”. Kitco metals report

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