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Morning NOTE

 24 March 2023


The ZAR continued its recent gains following the dovish comments from the FED,  as it battles the double edged sword of inflation and a Banking crises.


The Rand reached 18.0400 on the back of a weaker Dollar, following more dovish comments from the Fed and also financial aid from Treasury secretary Yellen.

  • On Wednesday Yellen sent markets into a tailspin, when she announced the there was “no blanket protection for depositors“ in US community banks.
    • This sent risk assets lower as the SP500 plummeted on the comments. She however backtracked on Thursday, with comments “the Treasury will use all its powers to protect depositors”.
  • This appears to have sent yields lower, following the FED’s dovish pivot on Wednesday.
    • The FOMC opting to raise rates by 25 bps and commenting that the cycle might have come to an end.
      • The result a sharp drop in treasury yields, sending the dollar tumbling and losing nearly 1% this week.
        • The market now turning its attention to data as well as Jimmy Bullard, the St Louis Fed president’s speech later this afternoon.
          • As well as US durable goods, manufacturing and services data.
      • The dollar index is on track to lose more than 1% this week.

The Rand likely to take its cues from international capital markets, with a keen eye on the Banking situation in the USA.
After seeing a nearly 3.6% gain this week, expect some Friday profit taking early in the session.

Data this week


  • 15h30 : James Bullard, St Louis Fed President speaks.

Market Movement Today:

  • The ZAR opened stronger on the back of a weaker Dollar and dovish Fed remarks.
    • After initial concerns about comments from treasury secretary Janet Yellen; she finally backtracked on Thursday;
    • Stating the US government would support ailing banks.
    • Markets recovered and yields dropped, sending the Dollar tumbling and providing support to the Dollar.
  • After the Fed’s 25bps hike and dovish pivot, the Dollar remains under pressure.  
    • The local unit also continuing to track the Euro’s moves against the Dollar .
    • Globally emerging markets currencies rebounding against Dollar and providing support to the ZAR.
  • Technically we are at the ZAR strongest level for the week, and it not uncommon for traders to book some profits ahead of the weekend.
    • This could lead to a weaker session targeting 18.2000-18.2500.
    • The trend however appears to be in favour of a weaker dollar and stronger ZAR if interest rates remain subdued.
  • NB: the risk and escalation of the banking crises will likely place pressure on risk assets and this would favour the dollar.
    • Likewise of the US government gets ahead of the crises, EXPECT MORE RISK ON and  STRONGER ZAR.
  • Trade:  after the sharp gains this week (60 cents or 3.2%), we encourage importers to hedge short terms commitments.
  • The banking crises is on going and remains a risk to RISK ASSETS, as is evidenced by the lower SP500.

Expected Ranges:

  • USDZAR: Expect a range 17.9400-18.2400
    • Importers: 18.1200-17.9400
    • Exporters:18.1400-18.2400
  • EURZAR: Expect a range of 19.4800-19.7200
    • Importers: 19.6400-19.7200
    • Exporters: 19.5600-19.4800
  • GBPZAR: Expect a range of 22.0700-22.3700
    • Importers: 22.1700-22.0700
    • Exporters: 22.2700-22.3700


  • USDZAR 18.0900
  • EURZAR 19.5900
  • GBPZAR 22.2300


  • The ANC  objected to the establishment of an ad hoc committee to investigate widespread corruption and criminal cartels at Eskom.
    • The ANC objected to the DA’s motion for the ad hoc committee,
      • as well as the Economic Freedom Fighters (EFF)’s amendment to the same motion to include investigating coal and evergreen contracts.
    • The DA’s motion came before the National Assembly (NA) on Thursday where the majority of the members of Parliament (MPs) voted against it.
    • This was a day after the National Assembly rejected another motion for a similar inquiry into the Phala Phala saga. EWN
  • Fuel price relief likely in April as rand firms
    • The rand firmed further against the US dollar on Thursday night, edging close to the psychological R18 mark and fuelling expectations of fuel price cuts in April.
    • It traded over 1% stronger, at around R18.07 to the greenback, buoyed by the US Federal Reserve raising interest rates by 25 basis points on Wednesday.
    • If the rand stays at current levels or strengthens further by the end of March,
      • fuel prices are expected to ease across the board in April, according to the Automobile Association of South Africa (AA). Moneyweb


  • In regular trading on Thursday, the major averages rallied sharply at the open as investors piled into technology stocks on bets that the Federal Reserve would soon pause its tightening campaign,
    • before giving back most of the gains on lingering concerns over the banking sector.
  • US stock futures were little changed on Friday after the major averages faced heightened volatility during Thursday’s regular session.
    • Investors continue to grapple with tightening monetary conditions and an ongoing banking crisis.
    • Futures contracts tied to the three major indexes drifted between small gains and losses.
  • Those moves came even after Treasury Secretary Janet Yellen said authorities are prepared to take more action if needed to stabilize US banks.
    • Investors now look ahead to US durable goods, manufacturing and services data on Friday, as well as St. Louis Fed President James Bullard’s speech.
  • The yield on the US 10-year declined below the 3.5% level.
    • The yield fast approaching the six-month low of 3.3% touched on Monday.
    • Investors digested the dovish rhetoric from the Federal Reserve along with the loosely-expected 25bps hike in its funds rate.
    • The Fed indicated that it was on the verge of pausing its tightening campaign to address recent risks to financial stability,
      • as bank failures this month threatened the health of systemic banks.
    • Concerns that high interest rates may increase the risk of a crisis drove the FOMC to keep year-end forecasts of the funds rate unchanged at 5.1%.
      • Also, the yield on the 2-year note fell 20bps to under 4%, narrowing the inversion on the yield curve. 


  • The Dow added 75 to 32,105
  • The SP500 gained 11 to 3,948
  • The Nasdaq added 117 to 11,787

 image: Trading economics


The US dollar

  • The dollar index steadied around 102.6 on Friday.
    • Investors still assessing the outlook for Federal Reserve monetary policy as the central bank aims to balance the fight against inflation with lingering concerns about the banking crisis.
    • Earlier this week, the Fed delivered a widely expected 25 basis point rate hike and hinted at only one more rate increase.
      • Fed Chair Jerome Powell said that officials don’t see rate cuts this year and are prepared to prolong their tightening cycle if needed.
      • Markets are however pricing in cuts later in the year given the slow down in inflation and banking crises.
    • Investors now look ahead to US durable goods, manufacturing and services data on Friday, as well as St. Louis Fed President James Bullard’s speech.
      • The dollar index is on track to lose more than 1% this week. FX NEWS

Asian markets mixed following comments from Treasury secretary Janet Yellen, as well as the Fed’s dovish pivot.

  • In Japan, the Nikkei 225 fell 0.13% to close at 27,385, sliding for the second straight session.
    • Investors also reacted to data showing Japan’s annual inflation rate retreated sharply from 41-year highs.
      • The latest readings reflecting easing global inflationary pressures and slowing economic activity worldwide.
      • Investors also digested data pointing to further improvement in Japanese manufacturing and services activities for March.
    • Meanwhile, investors continued to grapple with tightening global monetary conditions and an ongoing banking crisis.
      • Financial stocks led the decline, with losses from Mitsubishi UFJ (-1.1%), Sumitomo Mitsui (-0.5%) and Mizuho Financial (-0.8%).
      • Other index heavyweights also slumped, including Fast Retailing (-1%), Nippon Steel (-0.7%) and Toyota Motor (-0.2%). Reuters

Crude oil

  • US WTI crude futures edged below $70/BL on Friday as US Energy Secretary Jennifer Granholm told lawmakers that it will be “difficult” to refill strategic oil reserves this year.
    • This created speculations that the US government would only start buying at even lower prices.
    • Signs of robust crude supply from Russia also weighed on prices,
      • as the previously announced cut in the country’s oil production would come from a higher base of output than initially indicated.
      • Moreover, the global banking sector remains mired in uncertainties even after Treasury Secretary Janet Yellen
        • said authorities are prepared to take more action if needed to stabilize US banks, prompting investors to avoid risk assets.
      • Still, the US oil benchmark is on track to finish the week higher.
  • Traders citing bets that the Federal Reserve will soon end its tightening campaign and optimism over China’s demand recovery. Gulf Energy News


  • Gold prices rose to approach $2,000 /oz settling at $1987//oz, the highest in one year.
    • Investors continued to digest the Federal Reserve’s March meeting and risks to the global banking system.
    • The US central bank raised its funds rate by 25bps, as widely expected, but struck a dovish tone in its policy report and Summary of Economic Projections.
    • Gold is highly sensitive to the rates outlook as lower interest rates reduce the opportunity cost of holding non-yielding bullion.
    • Precious metal prices were also supported by a fresh flight to safety ;
      • This after Treasury Secretary Yellen told lawmakers the US government was not considering a “blanket insurance” for bank deposits,
      • The statement sent markets lower and reignited concerns about the financial crisis. Kitco metals report

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