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Morning NOTE

25 January 2023


The ZAR continued to range trade ahead of tomorrow’s SARB MPC and US GDP data release.

The Rand continued to test both sides of the range ahead of key data releases tomorrow.

  • Risk assets however, appeared to have found a base with the ZAR trading between 17.3500 – 17.0600.
    • This appears to be the range and continues to be supported by a healthy US stock market.
    • The SP500 continues to hover around the 4.000 level after early reaching a high of 4,040
    • Stocks however retreated on weaker earnings forecasts from giants Microsoft, citing a slowdown in core business activity.
  • Also On Tuesday US PMI data printed higher than expected especially services. This is something Fed governor Bostic, appears to worry about.
    • Markets remaining on edge after comments from Fed vice chair Lael Brainard, who continues to push for a higher terminal rate.
      • This is conflict with other governors calling for a lower rate as they conclude inflation has peaked.
    • NB:  it appears that investors are not blindly buying the tightening narrative,
      • with speculation about a recession prompting bets that the Federal Reserve will eventually cut rates later this year. 

US Bonds yields continues to trade lower and once again below 3.50%

  • The 10YT at 3.45%.
  • SP500 4,000
  • Dollar 101.82
  • 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/$ and below 17.3500/$
    • Traders unlikely to assume large directional bets ahead of Thursday’s MPC meeting.
  • The rally in global risk asset markets (Stocks), appears to have slowed the local units decline.
    • Also, bond hedges remain in place in the event of any policy surprises.
  • US markets were mixed  in New York on earnings reports after Microsoft warned of a decline in future revenues.
    • The slowdown in the US economy allowing for a potential FED pivot in 2023.
  • Earlier this morning UK GDP declined from 16.2% previous to 14.7% another indication that inflation is slowing across the world.
  • 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 17.1200-17.2400
    • Importers 17.1600-17.1200
    • Exporters 17.2000-17.2400
  • EURZAR :  Expect a range of 18.6000-18.8100
    • Importers 18.6700-18.6000
    • Exporters 18.7400-18.8100
  • GBPZAR :  Expect a range of 21.0800-21.2600
    • Importers 21.1400-21.0800
    • Exporters 21.2000-21.2600


  • USDZAR 17.1700
  • EURZAR 18.7200
  • GBPZAR 21.1700


  • Efforts by the City of Cape Town to become the first “load shedding” free metro are gaining traction, as it’s now allowed to buy electricity back from private suppliers.
    • The mayor said, the CoCT has exemption and that means that we can start to put in place a system in which people with solar panels on their roof can feed power back to the city and be paid in cash for that power.
      • Hill-Lewis welcomed Treasury’s decision to exempt the city from competitive bidding or tendering to buy power from homes and businesses. IOL
  • The Democratic Alliance (DA) said that it had roped in private security amid concerns that there may be a confrontation between its supporters and African National Congress (ANC) members on Wednesday.
    • The official opposition plans to march on the ANC’s Luthuli House in Johannesburg.
      • It is protesting against what it calls ANC-sponsored state capture, which it claims has led to the country’s ongoing energy crisis.
      • The march is expected to kick off later this morning but a few DA members have started gathering at the square as well. EWN
  • Former FNB CEO, Michael Jordaan, said South Africa’s banking system can do more to support and widen bank financing to small and medium enterprises.
    • He said they are much-needed drivers of economic growth and employment creation
  • Jordaan, who led South Africa’s oldest bank for 10 years, challenged the banking sector to lend more money to small businesses in order to get them to contribute to the country’s economic growth.


  • On Tuesday, the major US markets ended mixed with the Dow gaining 0.31%, while the S&P 500 and Nasdaq Composite fell 0.07% and 0.27%, respectively.
    • US stock futures fell on Wednesday as Microsoft offered a weak revenue forecast for the current quarter.
      • The software giant saying it saw a slowdown in its core businesses at the end of last year.
        • Nasdaq 100 futures dropped 0.6%, while S&P 500 and Dow futures lost 0.4% and 0.3%, respectively.
      • Those moves came as investors assessed a slew of corporate earnings reports that yielded mixed results,
        • while fears of a US recession vied with expectations of a slower pace of Federal Reserve policy tightening.
    • Investors now look ahead to more quarterly reports from major firms, with Tesla, Abbott Laboratories, AT&T, IBM and Boeing scheduled for Wednesday. Bloomberg


The yield on the US 10-year, consolidated around 3.5%, as hawkish remarks from several Fed policymakers threw some cold water into expectations,

  • that the Federal Reserve will soon slow its aggressive tightening campaign.
  • Fed Vice Chair Lael Brainard, once again driving the point that  rates would need to stay elevated to bring down inflation to its 2% target.
    • BUT, it appears that, investors are not blindly buying this tightening narrative.
  • Markets increasing 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 rates higher by only 25 basis points in February. CNBC


  • The Dow gained 104 to 33,733
  • The Sp500 declined 2.86 points to 4,016
  • The Nasdaq fell 30 points to 11,334

The US dollar

  • The Buck remained below 102 on Wednesday, and in turn hovering near its lowest level in almost eight months.
    • Traders citing lower yields as rising risks of a US recession and expectations of less aggressive policy tightening from the Federal Reserve weighed on the currency.
    • Weakening US economic data and mixed corporate earnings suggested that the broader economy is facing headwinds.
    • Easing US inflation also bolstered bets that the Fed would further slow down its rate hikes.
      • Moreover, Fed Governor Christopher Waller said that upcoming moves and the forecasted decline in inflation brought policy close to being “sufficiently restrictive”.
      • Investors now look ahead to a flurry of US data that could offer clues about the rate path.  FX NEWS

Asian markets mildly higher following another strong session on Wall Street.

  • In Japan, the Nikkei 225 rose 0.35% to close at 27,395, extending a rally for the 4th straight session as the BOJ committed to its policy of ultra-low interest rates.
    • The BOJ policy decision despite surging inflation and intense market pressure for further policy adjustment.
    • Meanwhile, analysts warned that Japanese stocks could face pressure ahead as the market becomes extended, while global economic uncertainties continue to weigh on sentiment.
    • Notable gains were seen from index heavyweights such as Nippon Steel (4.5%).  Bloomberg
  • In China, the Shanghai index rose 0.76% to close at 3,265, hitting its highest levels in four months after the PBoC left its key lending rates unchanged.
    • It was the fifth straight month of unchanged rates, as authorities aimed to boost market confidence and provide support to the economy.
    • The benchmark indexes also posted their fourth straight weekly gain amid an improving economic outlook in China following its rapid dismantling of Covid curbs.
    • Meanwhile, investors remain cautious ahead of the week-long Lunar New Year holidays amid the risk of an unexpected event while markets are shut. Nearly all sectors advanced on Friday,
    • NB: Chinese markets will be closed for the Lunar New Year holidays from January 21st to 29th and will resume trading on the 30th.  Reuters

Crude oil

  • WTI crude futures steadied above $80/bl after losing nearly 2% in the previous session.
    • The  recovery supported via improved demand hopes in top crude importer China and directly in opposition to fears a global economic slowdown.
      • Investors are also watching for further cues from OPEC+ after delegates said they expect an advisory committee of ministers to recommend keeping oil production at current levels when they meet next week.
      • Meanwhile, the US oil benchmark fell on Tuesday as mixed corporate earnings stoked fears of a US recession.
      • An industry report also showed that US crude inventories rose by 3.38 million barrels last week, much more than forecasts for a 1.6 million barrel increase. Gulf Energy news


  • Gold remained above $1,930/oz on Wednesday, hovering near its strongest levels in nine months.
    • Bullion traders citing general dollar weakness, as softening US economic data, mixed corporate earnings and recent comments from Federal Reserve officials signalled a less aggressive monetary tightening ahead.
      • Fed Governor Christopher Waller reiterated that policy is  “pretty close” to being “sufficiently restrictive”, and he remains in favour of a smaller 25 basis point increase at the next meeting.
      • Investors now look ahead to a raft of US data that could guide the rates outlook.
      • Gold remains 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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