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Morning NOTE

25 November 2022


The ZAR reached 16.9000, before reversing on the back of profit taking ahead of the SARB MPC.


The Rand continued its recent gains and reached 16.9000, before consolidating around the R17/$ handle.

  • It was all an MPC story as the US celebrated their thanks giving holiday and with many traders likely to make it a long weekend expect low volume liquidity conditions.
    • Earlier in the day,
      • The South African Reserve Bank raised its benchmark repo rate by 75 bps to 7% at its November 2022 meeting. This was in line with expectations.
      • It was the 7th consecutive rate hike since policy normalization started in November 2021.
      • The objective remained to anchor inflation expectations more firmly around the mid-point of the target band and achieve the inflation target in 2024.
      • Earlier in the week SA’s inflation rate unexpectedly rose to 7.6% in October from 7.5% in September.
      • Thus staying above the upper limit of the central bank’s target range of between 3% and 6% for the sixth straight month.
  • Meanwhile, the GDP growth projections were cut to 1.8% in 2022 (vs 1.9%),mainly due to rolling blackouts and also likely to slow down domestic demand  inflationary pressures in the economy. source: SARB
  • The US 10YT yield drifted lower and traded at 3.66% and the Dollar index also fell to reach 105.80 after the FED minutes surprised to the dovish side.
  • Market now turning their attention to the last FOMC meeting in December where 50 bps is expected from the FED.
  • Inflation appears to have peaked and this likely to support Risk assets and allow investors to move out of safe-haven assets like the Dollar.

This will be ZAR supportive.

Significant Market Data:

On Thursday

  • 11H30 : SA PPI YOY expected  16.05% VS 16.3% PREVIOUS
    • In line with expectations at 16%.
    • The SARB delivered 75bps but also mentioned they expect inflation to drop to 5.4% in 2023.
    • This would we inside the band, and we can expect a slowdown in MPC rate increases.


  • The ZAR retracing large gains in early trading as traders book profits on the back of a strong run for the local unit.
    • The US holiday, removing large pockets of liquidity and Dollar Shorts likely to book profits ahead of an “American long weekend”.
    • We expect some Dollar buying as market makers also look for weak stops allowing for 17.1000 -17.1800  in the trading session.
    • Nb: The market dynamic have changed and we now expect a Weaker Dollar on the back of a slowdown in FED policy.

Expected Ranges

  • USDZAR :  Expect a range 16.8000-17.1500
    • Importers 16.9500-16.8000
    • Exporters 17.0500-17.1500
  • EURZAR :  Expect a range of 17.5300-17.8300
    • Importers 17.7300-17.8300
    • Exporters 17.6300-17.5300
  • GBPZAR :  Expect a range of 20.4200-20.7200
    • Importers 20.5200-20.4200
    • Exporters 20.6200-20.7200


  • USDZAR 17.000
  • EURZAR 17.7000
  • GBPZAR 20.5700


  • After the SARB hiked rates by another 75 bps, Unions protested as South African’s continue to suffer.
    • The South African Federation of Trade Unions (Saftu) said the MPC’s 75 hike, meant homeowners and motorists will have to dig deeper into their pockets to cover the costs of their mortgages and car loans.
    • While the latest interest rate hike was expected Saftu laid into the Sarb governor – Lesetja Kganayago.
      • Saftu spokesperson, Trevor Shaku said the federation’s worried that the Sarb will still pile on the interest rate hikes that worsen consumers’ financial woes.
        • “By using interest rates, governor Kganyago is squeezing the consumers. In other words, he’s punishing the victims of inflation,” complained Shaku.  EWN
  • Old Mutual has announced that it has applied for a banking licence and plans to launch a full transactional account in the second half of 2024.
    • The insurer will join an increasingly crowded market, following the entry of Discovery, TymeBank and Bank Zero in recent years.
    • African Bank is also resurgent, having opened over one million transactional accounts (and in August it bought troubled Ubank, which potentially gives it access to millions more retail customers).
    • This surprised the market as OM recently unbundled its holding in Nedbank to move away from the Bank-Assurance model.  Moneyweb
  • Retailers are expecting large crowds to descend on stores this Black Friday.
    • However, with another interest rate hike and rising inflation, experts have warned consumers to be cautious with their spending.
    • Andrew Mills, group executive for marketing at Pick n Pay, said the retailer was expecting customers to be hunting for more value as they remained under pressure after a tough year. News24



  • US markets were closed because of the US thanks giving holiday.
  • Recap; on Wednesday
    • 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
    • after FOMC minutes showed officials see the case for a slower pace of interest rate rises


  • US 10 Year Yield was 3.67 percent on Friday November 25.
  • It was a US holiday so very light trading.
  • 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,
  • after FOMC minutes showed officials see the case for a slower pace of interest rate rises.


(US Holiday)


Asian Markets:

  • In Japan, the Nikkei 225 fell 0.35% to close at 28,283 as investors took some profits off the table following a strong rally driven largely by expectations that the US Federal Reserve will slow the pace of interest rate hikes.
    • Investors also reacted to data showing core consumer prices in Tokyo, a leading indicator of nationwide price trends, surged to a 40-year high of 3.6% in November amid broadening inflationary pressures.
  • In Australia, the ASX 200 added 0.24% to close at 7,260 on Friday, rising for the fourth straight session to near six-month highs,.
    • Traders citing, expectations that the US Federal Reserve will slow the pace of interest rate hikes boosted equities and other risk assets.
    • The benchmark index also finished the week higher for its fourth winning week in five.
    • Consumer and technology stocks led the charge.  Reuters
  • The US dollar held below 106 on track to end the week lower.
    • The Buck was weighed down by expectations that the Fed would tighten less aggressively in the upcoming meetings.
      • The latest Fed meeting minutes indicated members were open to  to slow the pace of interest rate hikes.
      • Earlier this month, the Fed delivered its fourth straight 75 basis point rate increase in an effort to tame stubbornly high inflation, pushing borrowing costs to the highest levels since 2008.
    • The dollar is set for a weekly loss against other major currencies, but remains up week-to-date against the Chinese yuan amid a worsening Covid outbreak in China.  FX News
  • Brent crude futures steadied above $85/bl on Friday, and US WTI crude futures edged above $78/ bl, but were still set to end the week lower due largely to concerns about Chinese demand .
    • Also reports of a high price cap by G7 nations on Russian oil that eased supply worries.
    • The US oil benchmark is down more than 2% this week, on track for the third straight weekly decline.
    • China continued to grapple with surging Covid cases, stoking fears that authorities would adopt wider movement restrictions that could hurt energy demand in the world’s top crude importer.
    • The theme likely to keep crude oil prices subdued .  Gulf energy report


  • Gold firmed up above $1,750 /oz and was on track to end the week slightly higher.
    • A drop in US yields as well as a softer dollar after  the latest Federal Reserve meeting minutes showed that some of US policymakers backed a slower pace of interest rate hikes in the coming months.
    • Markets are betting that the Fed would moderate the size of rate hikes to 50 basis points in December after delivering its fourth straight 75 basis point increase earlier this month.
    • Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal. Kitco metals report


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