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Morning NOTE

24 January 2023


The ZAR consolidated above the R17/$ level, ahead of the SARB’s MPC rate decision on Thursday.


The Rand remained above R17/$ ahead of Thursday’s SA Reserve Bank rate decision.

  • Traders pricing for a 50 bps hike in the Repo rate, that will also see the Prime overdraft rate jump to 11%.
    • The local unit also ignoring global risk sentiment after the SP500 spiked to 4040 in New York trading, sending risk assets higher.
    • As is customary ahead of SA EVENT RISK moments, like MPC, foreign investors holding local bonds,  usually buy USDZAR as a proxy hedge.
      • The hedge is to provide protection against any “unexpected” policy decisions and usually gets unwound after the event.
  • The Dollar remains under pressure, trading below 102 as traders bet on a dovish Fed in 2023.
    • Recent US economic data have suggested that the broader economy is facing rising headwinds.
    • At the same time, easing US inflation bolstered bets that the Fed will further slow down its rate increases,
      • markets now pricing an over 95% chance that the central bank will raise the fed funds rate by 25 basis points at the next meeting.
  • The 10YT trading at 3.51%, EURUSD at 1.0880 and SP500 4020 at the time of writing.
  • On Monday ECB president Christine Lagarde, reiterated that inflation remains far too high and that the ECB will continue to “RAISE RATES QUICKLY”, to bring it down.
    • She largely repeated the bank’s most recent policy guidance.
    • “We have made it clear that ECB interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive,
      • and stay at those levels for as long as necessary,” Lagarde said in a speech.
  • Focus however remains on the SARB’s MPC rate decision on Thursday.

Data this week




  • 09h00 : UK PPI F/CAST 14.6% YOY VS 17.2% PREVIOUS
  • 09h00 : UK PPI  F/CAST 11.5% YOY VS 13.3% PREVIOUS


  • 15H30 :  US GDP EXPECTED 2.6% VS 3.2% QoQ
  • 15H30: US DURABLE GOODS +2.6% VS -2.1% PREVIOUS  MoM.



Market Movement Today:

  • The Rand continues to trade in a range above R17/$ ahead of Thursday’s MPC meeting.
    • The local unit for now ignoring global risk on sentiment as investors hedge (BUY USDZAR) ahead of the MPC.
      • The hedges are used as protection against long only SA government bond portfolios,
  • US markets rallying strongly in New York on earnings reports and also the potential for a dovish FED pivot in 2023.
  • Any decline in foreign markets likely to push the ZAR lower towards the 17.3500 level.
    • This will however be another opportunity for Exporters to take advantage of elevated levels.
    • US GDP and more dovish US data likely to support a stronger ZAR, as more governors talk about a dovish pivot in 2023.
    • Continued benign inflationary pressures across the globe likely to supress yields in 2023, and this will be ZAR supportive.


  • NB: The focus remains the SARB and US GDP .
  • SARB hikes will be supporting the carry advantage and the ZAR.

TRADE : SELL USDZAR on rallies.

Expected Ranges:

  • USDZAR :  Expect a range 17.0800-17.290
    • Importers 17.1500-17.0800
    • Exporters 17.2200-17.2900
  • EURZAR :  Expect a range of 18.5200-18.8200
    • Importers 18.6200-18.5200
    • Exporters 18.7200-18.8200
  • GBPZAR :  Expect a range of 21.0800-21.4400
    • Importers 21.2000-21.0800
    • Exporters 21.3200-21.4400


  • USDZAR 17.1700
  • EURZAR 18.6800
  • GBPZAR 21.2700


Eskom crises

  • Eskom considering permanent load shedding for the next 2 years 
    • A spokesman said, “the reality is that the recovery of the Eskom coal fleet, currently comprising 80% of our generation power mix, will not be achieved within the short term.
    • It will take at least two years to ultimately reach the perfectly-desirable energy availability factor.” IOL
  • After mentioning that South Africans need to brace themselves for the long haul of load shedding,
    • Ramaphosa went further to say, that red tape has hampered Eskom’s maintenance and the supply of additional megawatts from other sources.
    • “When we are now supposed to do things, there is this regulation, law and processes.
    • When Eskom has to buy a boiler, they have to go to the Treasury and get permission, it is a long process,” said Ramaphosa on Monday.
    • He also added, that it has stalled independent power providers from adding more megawatts to the national grid.
    • Ramaphosa says people are no longer looking for excuses, they just want power. EWN
  • President Cyril Ramaphosa said that he wanted to appoint a budget director who would monitor the budgets which Treasury allocated to provinces.
    • Speaking in Pietermaritzburg,  Ramaphosa was at an African National Congress (ANC) provincial executive committee meeting in on Monday.
    • He said that he was concerned that there were many instances of unused funds in these budgets.
    • President Ramaphosa said that he’d received a report from Treasury about the unused funds in the budgets which were allocated to various provinces. EWN
  • Former President Jacob Zuma’s foundation says he is forging ahead with the appeal of a ruling in favour of President Cyril Ramaphosa.
    • It says the President should make his case as an accused in a criminal court. News 24


  • On Monday, the Nasdaq rallied 2.01%, the S&P 500 jumped 1.19% and the Dow gained 0.76%.
  • All three benchmarks turning positive again for the year.
    • Ten out of the 11 S&P sectors advanced, led by technology, communication services and consumer discretionary.
    • Those gains came despite mixed corporate earnings results and weakening US economic data, as investors focused on forward guidance and hopes that the economy was faring better than expected.
    • US stock futures steadied on Tuesday after the major averages posted their second straight day of gains during Monday’s regular session.
  • Investors looked ahead to more earnings reports for a glimpse on the state of corporate activity.
    • Futures contracts tied to the three major indexes were all trading near breakeven.
    • Investors now look ahead to more earnings reports from major firms such as Microsoft, Johnson & Johnson, Danaher, Verizon and General Electric, among others.


  • The US10YT remained at 3.50%. Markets being whipsawed after dovish comments from Fed governor Christopher Waller was met with more hawkish comments from Fed Vice chair Lael Brainard.
    • The hawkish remarks threw some cold water into expectations that the Federal Reserve will soon slow its aggressive tightening campaign.
    • Brainard, considered a dove, said rates would need to stay elevated to bring down inflation to its 2% target.
    • Still, investors are not blindly buying this tightening narrative, with speculation about a recession prompting bets that the Federal Reserve will eventually cut rates later this year.
    • Data released last week showed that Americans curbed spending while business investment fell, heightening concerns that the economy may be moving closer to recession.
    • Money markets are now pricing an over 95% chance that the US central bank will hike rates by 25 basis points in February. Bloomberg


  • The Dow added 254 to 33,629
  • The SP500 added 47 to 4,019
  • The Nasdaq gained 223 to 11,364


  • The US dollar held below 102 on Tuesday, hovering near its lowest levels in almost 8 months, as rising risks of a US recession and expectations of less aggressive policy tightening from the Federal Reserve weighed on the currency.
    • Recent US economic data have suggested that the broader economy is facing rising headwinds.
    • At the same time, easing US inflation bolstered bets that the Fed will further slow down its rate increases.
    • Bond and money markets continued to price for 25 bps.
    • Fed Governor Christopher Waller also said the upcoming rate moves and an expected continued decline in inflation turned policy close to “sufficiently restrictive”.
    • Investors now look ahead to, including the Q4 GDP growth rate, durable goods orders, the PCE price index, and personal income and spending data. FX News

Asian markets rallied strongly on the back of another strong close on Wall Street.

  • In Japan, the  Nikkei 225 jumped 1.46% to close at 27,299, rising for the third straight and tracking another rally on Wall Street .
    • Markets of the opinion for less aggressive interest rate hikes from the Federal Reserve boosted shares of technology and other growth stocks.
      • Japanese shares also built on gains from last week as the Bank of Japan remained committed to its policy of ultra-low interest rates despite rising inflation.
    • Technology stocks led the market higher, with strong gains from Tokyo Electron (2%), SoftBank Group (3.4%).
  • In Australia, the ASX rose to 7,490 scaling its highest levels in nine months, with technology and mining stocks leading the market higher.
    • Australian shares also tracked gains on Wall Street overnight as expectations for less aggressive interest rate hikes from the Federal Reserve boosted shares of technology and other growth companies.
    • Gains in the technology sector were led by Xero (3.3%), Block Inc (5.7%).  Reuters
  • US WTI crude oil steadied near $82 and Brent crude  steadied near $88 per barrel on Tuesday and both  hovering close to the highest levels in seven weeks.
  • Traders underpinned by hopes for a demand recovery in top crude importer China and expectations of less aggressive central bank policy tightening.
    • Last week, both the IEA and OPEC offered a bullish outlook for 2023, saying that the reopening of the Chinese economy will boost demand.
    • Weakening US economic data also bolstered bets for a slower pace of Federal Reserve rate hikes, with Fed officials backing a smaller 25 basis point increase at the next meeting.
    • However, trading is expected to remain subdued as most Asian markets are offline for the Lunar New Year holidays. Gulf Energy News

Gold traded  above $1,930 /oz on Tuesday, hovering near its strongest levels in nine months amid a general dollar weakness,

  • The buck remaining under pressure following weakening US economic data and recent comments from Federal Reserve officials signaled a less aggressive monetary tightening ahead.
    • Investors now look ahead to a raft of US data that could guide the rates outlook including Q4 GDP growth rate, durable goods orders, the PCE price index and personal income and spending data.
    • Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion, and vice versa.  Kitco metals report.

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