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Morning NOTE

26 October 2022


The ZAR strengthened after initial session weakness after the global risk rally continued.


  • The Rand recovered most of its losses incurred on Monday to trade stronger to 18.1300.
    • The local unit finally, switching course from (i.e. weakness due to bond holding hedging), to strength on the back of a weaker Dollar.
  • The Dollar losing ground as yields traded lower and stocks rallied on the back of dovish comments from SF Fed governor Mary Daly.
    • The SP500 at once stage trading at 3868, and the Dollar index lower to 110.74.
    • The buck remains under pressure, after the WSJ’s report of a dovish Fed in coming months.
    • The Journal stating Fed officials are likely to consider a smaller increase in December amid concerns about overtightening, the WSJ reported on Friday
  • Earlier this morning, Australian inflation printed the highest in 32 years after CPI printed 7.3% in Q3  vs 6.1% in Q2.
  • Indicating the RBA’s decision to slow down might have been too earl and that inflation remains a serious global problem.
  • Locally, all eyes on the SA MTBS at 14h00 .
    • Investors remain nervous ahead of the  budget , as continued  Power cuts, wage disputes amongst other , placing the finance minister under pressure to produce a balanced budget .
    • These are some of the key issues Finance Minister Enoch Godongwana will have to manage on Wednesday afternoon when he delivers his medium-term budget policy statement (MTBPS).
    • Just this week, Eskom told Parliament it needs a billion rand to address rolling blackouts.
    • At the same time, unions have rejected government’s 3% wage offer.

Significant Market Data:


    • **Enormous pressure on the finance minster Enoch Godongwana.


  • 11h00: SA PPI YOY 15.8% EXPECTED  VS 16.6% PREVIOUS
  • 14H15: ECB INTEREST RATE DECISION +0.75BPS HIKE EXPECTED ( from 1.25% to 2.00% ) .
  • 14H30 : US GDP Q3 : +2.1% EXPECTED VS -0.6% PREVIOUS




  • The ZAR stronger on the back of a strong start for Risk assets.
    • US yields continued to trade lower with the 10YT at 4.06% ahead of tomorrows key US GDP data.
    • Locally, markets treading water ahead of the SAMTBPS, but expect some weakness as we approach 14h00.
  • For now traders happy to ride the Risk wave and the probability exists for Monday’s low of 18.0300 in USDZAR.

For today:
Trade: Risk on, and look to BUY USDZAR into 18.0000 the figure ahead of the budget speech
Enoch under pressure from Eskom and  unions, to print more money, and the risk remains, that  it could undo the SARB’s exemplary handling of the Inflation crises.

  • We saw market reactions recently in the UK, and this is why markets remain nervous ahead of the Budget.
  • NB: The RISK EVENT, remains tomorrows US GDP and traders unlikely to increase bets.
    • A stronger than expected GDP will result in Dollar buying and a weaker ZAR and
  • A weaker than expected number will see more ZAR gains as traders will enhance bets that the FED have peaked.

Expected Ranges

  • USDZAR :  Expect a range 18.0000-18.3600
    • Importers 18.1200-18.0000
    • Exporters 18.2400-18.3600
  • EURZAR :  Expect a range of 18.0000-18.2400
    • Importers 18.0800-18.0000
    • Exporters 18.1600-18.2400
  • GBPZAR :  Expect a range of 20.7300-20.9400
    • Importers 20.8000-20.7300
    • Exporters 20.8700-20.9400


  • USDZAR 18.1500
  • EURZAR 18.1200
  • GBPZAR 20.8400


  • Government has given public service unions an ultimatum on the long-standing wage dispute.
    • The unions have a few hours to take government up on its wage offer before Treasury delivers the medium-term budget policy statement on Wednesday afternoon.
    • Some unions want a 10% wage increase, while government says it won’t exceed its baseline offer of 3%. EWN
  • Ramaphosa continues to be well supported in the North west province .
    • The NW party branch said attacks are unwarranted and should not continue after former presidents criticised his tenor.
    • It also stated that the ANC was at a critical point of its existence and could not afford its own leaders contributing to its further weakening.
    • Two of the three, Mbeki and Motlanthe, only became more openly involved in the party’s structures after Zuma was removed from power in 2018.
  • Also ;
    • The Presidency has asked critics of President Cyril Ramaphosa to judge him based on facts and not rumours.
    • Presidential spokesperson Vincent Magwenya on Tuesday responded to recent criticism directed at Ramaphosa by former presidents.
    • The Presidency has come out in defence of Ramaphosa, following criticism of his tenure by former presidents Thabo Mbeki and Jacob Zuma.

All eyes are on the SA medium term budget with factions all vying for positions.

  • “The DA’s 2022 alternative MTBPS presents how a DA government will establish a base to accelerate economic growth,
    • by reform state-owned enterprises for private investment and relieving the economy of anti-poor policies,” said DA finance spokesperson Dion George.
      • Just this week, Eskom told Parliament it needs a billion rand to address rolling blackouts.
      • At the same time, unions have rejected government’s 3% wage offer.
    • Godongwana has to speak to during his medium-term budget policy statement. EWN



  • In regular trading on Tuesday, the Dow gained 1.07%, the S&P 500 climbed 1.63% and the Nasdaq Composite jumped 2.25%.
    • Those moves came as Treasury yields retreated sharply, with the benchmark US 10-year yield pulling back to 4.1% after hitting a 15-year high of 4.33% last week.
  • US stock futures fell on Wednesday, with tech-heavy Nasdaq 100 futures losing 2% as investors digested disappointing quarterly updates from big technology companies. S&P 500 futures also dropped 1%, while Dow futures lost 0.3%.
    • In extended trading, Google-parent Alphabet slumped about 7% on weaker-than-expected earnings and revenue as the firm grappled with slowing online ad spending.


  • The US 10-year Treasury yield, the benchmark for borrowing costs worldwide, bottomed around 4%, moving further away from an over 14-year high of 4.3% reached last week.
    • The hopes remain on hopes the Federal Reserve could slow down the pace of interest rate hikes later this year. 
    • Speculation about a policy pivot followed a report from the Wall Street Journal that hinted some Fed officials are concerned about overtightening.
    • San Francisco Fed President Mary Daly echoed this view, saying that the central bank should start discussing the potential of a smaller rate hike in December.
    • Still, treasury yields remain close to their highest since June 2008, as the Federal Reserve has already raised its fed fund futures by 300 basis points since March, one of the fastest moves in history.


  • The Dow added 337 points to 31,836
  • The SP500 added 61 to 3,859
  • The Nasdaq added 346 to 11,199 .


  • Asian markets higher on the back of Wall Street overnight performance. Stocks higher in New York even though tech bell weathers disappointed.
    • In Japan, the Nikkei 225 gained 0.67% to close at 27,432, hitting their highest levels in about a month.
      • Stocks lifted by hopes that the US Federal Reserve would slow the pace of rate hikes soon.
      • Soft US data this week signalled that previous rate hikes are already having an impact on the economy, supporting the case for less aggressive Fed tightening.
      • A weak yen also provided an additional boost to local shares as it raises profit forecasts for export-heavy Japanese industries, as well as an upbeat start to the earnings season so far.
    • In Australia, the ASX 200 rose 0.18% to close at 6,811 on Wednesday, hitting its highest levels in almost six weeks intraday, lifted by a retreat in global bond yields as investors speculated on peak hawkishness from the US Federal Reserve.
      • The benchmark US 10-year yield pulled back to 4.1% after hitting a 15-year high of 4.33%, while its Australian counterpart fell back below 4% after hitting an 8-year high of 4.3%.
      • Earlier Aussie CPI printed at 7.3% higher than expected and likely to get the RBA to reflect on slowing down to soon. Reuters
  • The  US dollar index stabilized around 111 on Wednesday after losing 1% in the previous session.
    • The Buck remained under pressure from growing expectations that the US Federal Reserve will turn less aggressive in the coming months.
    • After delivering a widely expected 75 basis point rate hike in November, Fed officials are likely to consider a smaller increase in December amid concerns about overtightening, the WSJ reported on Friday.
    • Soft US data this week signaling that previous rate hikes are already having an impact on the economy supported such a view.
    • The dollar held at multi-week lows against the euro, sterling and antipodean currencies, though it remained near multi-decade highs against the yen and the yuan. Fx news


  • The annual inflation rate in Australia climbed to 7.3% in Q3 of 2022 from 6.1% in Q2.
  • It was above market forecasts of 7.0% and  the highest print since Q2 1990.
  • The RBA Trimmed Mean CPI jumped 6.1% yoy, the fastest pace since the series began in 2003, exceeding the midpoint of the RBA’s 2-3% target. source: Australian Bureau of Statistics

Brent crude oil  fell below $93 per barrel on Wednesday after rising in the previous session, as an industry report pointed to a large build in US crude stockpiles.

  • The data raising fears of a global recession continued to hang over the market.
  • Data from the American Petroleum Institute showed that US crude inventories surged by about 4.5 million barrels last week, far exceeding expectations for a build of about 200,000 barrels.
  • Investors also continued to fret about the prospect of a global economic slowdown.
  • Also with soft US data this week signaling that aggressive monetary tightening in recent months are already having an impact on the economy.  Gulf energy news

 Gold prices steadied above to $1,650/oz, holding a recent advance as traders cautiously awaited more clues on the trajectory of US Federal Reserve monetary tightening.

  • After delivering a widely expected 75 basis point rate hike in November, Fed officials are likely to consider a smaller increase in December amid concerns about overtightening, the WSJ reported on Friday.
  • NB: this was NOT POWELL,  and market s could be getting ahead of themselves.
  • Meanwhile, investors remained cautious about upside risks to inflation that could drive another rally in the dollar and Treasury yields.
  • Markets also stayed firmly positioned in the dollar as a safe-haven asset and as an alternative to gold amid heightened political and economic uncertainties worldwide. Kitco metals

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