View this email in your browser

Morning NOTE

24 November 2022


The ZAR gained on the back of higher SA CPI and Dovish Fed minutes to trade below R17/$ for the first time since 13 Sept 2023.


The Rand traded stronger after Fed minutes indicated, the majority of voting members were in favour of slowing down the rate hiking cycle.

  • Some members were still in favour of a higher terminal rate, but he majority indicates that rate hikes will be lower than before,
    • With the potential for a pause in 2023.
  • The ZAR benefitting from a sharp fall in the Dollar after Bond yields retreated even further to 3.70%.
    • The dollar also weakened below 106, its lowest levels since mid-August after the meeting minutes showed a majority of policymakers it would soon be appropriate to slow the pace of interest rate hikes.
      • Earlier this month, the Fed delivered its fourth straight 75 basis point rate increase to4% in an effort to tame stubbornly high inflation.
      • This pushing borrowing costs to the highest levels since 2008.
      • The dollar slipped across the board, with the most pronounced selling against the euro and the yen.
  • The ZAR in a strong position as markets expected the SARB MPC to increase rates by 75 bps after Wednesday’s higher than expected SA CPI print at 7.6% YOY.


Significant Market Data:


  • 10h00 : SA INFLATON YOY expected  7.4% VS 7.5% PREVIOUS
    • Actual 7.6% likely to force the SARB to hike by 75 bps at 3pm today.
    • Was Dovish and  Risk positive.


  • 11H30 : SA PPI YOY expected  16.05% VS 16.3% PREVIOUS


  • The ZAR on the front foot and blasting through the 17.1000 resistance level.
    • Traders citing a combination of higher than excepted SA CPI and a Dovish FED.
    • The US dollar dropping sharply across the board, and  supporting the ZAR  on the back of increased appetite for risk assets.
    • The SP500 rising above 4000, the 10YT at 3.70% all supporting the case for a stronger ZAR.
  • And as mentioned yesterday, “NEW” data did move the market.
    • Dovish fed minutes (or the extent of it) , surprising markets resulting a rapid Dollar sell-off.
  • This morning we opening outside of the range indicating an unstable market, with potential for more activity.
    • The US are celebrating a holiday (Thanksgiving ) and could result in some profit taking, taking the ZAR back above R17/$.
  • However, the change in sentiment towards rate policy, now showing a Dollar under pressure and this will be ZAR supportive .
  • We now await more market moving data with the SARB widely expected to hike 75 bps.

Expected Ranges

  • USDZAR :  Expect a range 16.8600-17.0500
    • Importers 16.9200-16.8600
    • Exporters 16.9800-17.0500
  • EURZAR :  Expect a range of 17.6000-17.7500
    • Importers 17.6500-17.6000
    • Exporters 17.7000-17.7500
  • GBPZAR :  Expect a range of 20.3800-20.5900
    • Importers 20.4500-20.3800
    • Exporters 20.5200-20.5900


  • USDZAR 16.9500
  • EURZAR 17.6800
  • GBPZAR 20.4800



  • DA leader John Steenhuisen said he was denied access to Eskom’s Kusile power station in Mpumalanga on Wednesday.
    • Steenhuisen said that he was set to conduct an oversight visit at the power station in his capacity as a member of Parliament.
      • He said that the visit was meant to be part of measures to address the country’s dire energy crisis.
      • But on arrival at Kusile power station, Steenhuisen said that he was denied access by a group of security officials.
    • Gordhan denied access to Steenuisen. EWN


  • Members of the South African Police Service are expected to fight fire with fire over the festive season.
    • With crime continuing to rise,  Minister of police Beki Cele said fighting crime came at a cost for the police force.
    • 22 police officers were killed in the three months between July and September.
    • Cele said it was two members less compared to the same reporting period last year, said Cele. IOL


  • SARB governor Lesetja Kganyago’s repo rate announcement on Thursday afternoon.
    • Markets are pricing in 75 bps, but it remains to be seen whether the MPC will be swayed in any way by Fed minutes from its November meeting.
    • Locally, SA’s latest headline inflation number came in higher for October on Wednesday at 7.6% vs 7.4% expected.
    • This is likely to add pressure on the SARB to be more conservative or hawkish in its sentiments and repo rate decision.
    • Traders saying the MPC will have no option but to hike the repo rate sharply by another 75 basis points on Thursday. MONEYWEB


A majority of Fed officials indicated that a slowing in the pace of the fed funds rate increase would likely soon be appropriate, minutes from the November 1-2 FOMC meeting showed.

  • Policymakers also noted that with inflation showing little sign of abating, and with supply and demand imbalances in the economy persisting,
  • the ultimate level of the federal funds rate that would be necessary to achieve the Committee’s goals was somewhat higher than they had previously expected.
  • The Federal Reserve raised the target range for the federal funds rate by 75bps to 4% during its November 2022 meeting,
  • It was the 6th consecutive rate hike and the 4th straight three-quarter point increase, pushing borrowing costs to a new high since 2008. source: Federal Reserve
  • The Dow closed more than 100 points up on Wednesday, and the S&P 500 and the Nasdaq were up 0.6% and 1%, respectively.
    • Traders betting on Risk after minutes showed officials see the case for a slower pace of interest rate rises.
    • The November meeting minutes also showed that policymakers were growing concerned about the economy’s health but hinted at a higher terminal rate.
    • Meanwhile, since that meeting, markets have parsed a slew of economic data that somehow reinforced the view of a 50-bps hike in December.


  • The yield on the US 10-year dropped toward 3.7%, the lowest in a week after the latest Fed meeting minutes.
    • Dovish officials signalled smaller rate hikes ahead by the Fed.
    • Money markets bet the US central bank will lift the fed funds rate by 50 bps in December, after four consecutive 75 bps increases.
    • Minutes also indicating a substantial majority of policymakers agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes.
    • At the same time, the terminal rate is now seen above 5% in 2023.


  • The Dow added gained 95 to 4,027
  • The Sp500 added 23 to 4,027
  • The Nasdaq gained 110 to 11,285


  • Asian markets mixed with Japan and Australia higher, but China Lower.
    • Mainland China reported more than 31,000 Covid infections for Wednesday, including cases without symptoms.
      • That’s more than the country reported during the Shanghai lockdown in April.
      • Shanghai Disneyland said it plans to resume operations on Friday, after suspending operations due to Covid on Oct. 31. CNBC
    • In Japan, the Nikkei 225 climbed 0.95% to an over 2-month high of 28,383, as Japanese shares played catch-up with global peers amid hopes for a less aggressive US Federal Reserve tightening.
      • The latest Fed meeting minutes showed that most officials backed the need to moderate the pace of rate hikes soon, while only a minority called for a higher terminal rate. 
  • In Australia, the ASX climbed 0.14% to close at 7,242 with mining and technology stocks leading the charge.
    • Shares also tracked Wall Street higher after the latest Federal Reserve meeting minutes showed that most officials back the need to moderate the pace of rate hikes soon.

The US Dollar

  • The dollar index weakened below 106 on Thursday, after dovish fed minutes showed appetite to slow down the hiking cycle.
    • The central bank now wants to assess the impact of its historic tightening campaign on the economy, with recent softness in US economic data supporting the case for more moderate moves.
      • The dollar slipped across the board, with the most pronounced selling against the euro and the yen.
      • The Japanese yen benefiting and it appreciated past 140 per dollar.
      • It was at its strongest levels in nearly three months
      • However, BOJ Governor  Kuroda recently stressed the need to maintain ultra-loose monetary policy to support the economy in the wake of another hot inflation reading.
      • This likely to cap any large Yen advances.
  • US WTI crude oil remained below $78 /barrel after closing at a two-month low in the previous session.
    • Prices remained under pressure as surging Covid cases in China stoked fears of even tighter movement restrictions that could hurt energy demand in the world’s top crude importer.
      • Investors also weighed a larger-than-expected build in US gasoline stocks, which jumped by 3.058 million barrels last week, as indicating a drop in demand.
      • Still, investors remained cautious as OPEC could further intervene in markets to cope with a recession-driven demand downturn.


  • Gold rose above $1,750/oz and climbing for the third straight session after the latest FOMC minutes showed that a substantial majority of policymakers agreed it would likely soon be appropriate to slow the pace of interest rate hikes.
    • The central bank now wants to assess the impact of its historic tightening campaign on the economy.
    • After 6 consecutive rate rises , markets are betting that the Fed would moderate the size of rate hikes to 50 basis points in December .
    • Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal


Copyright ©
2022 RussellStone Treasury 
All rights reserved.

Our mailing address is:

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.