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Morning NOTE

24 September 2022


The ZAR weakened past R18.0000 /$ on the back of global risk off sentiment and a UK Pound dropping to record lows.


  • The Rand followed risk assets lower following a sharp drop in Risk sentiment after the market voted against the new UK governments fiscal policies.
    • Bond yields spiked across world, after the New UK PM Liz Truss and New finance minister, Kwasi Kwarteng, announced widespread tax cuts, what many now call ” Trussonomics”.
    • Economists warning that tax cuts would effectively negate all the work the BOE (Bank of England) has done to fight multi-decade high inflation and the market voted against it.
  • The environment, not friendly to Risk assets (stocks) as well as Emerging Market (EM) FX like the Rand.
    • The US Dollar trading near the 114 mark on Monday for the first time since May 2020.
    • Fed policies as well as comments that rate cuts are only expected in 2024, as well as safe-haven buying, after the Pound fell to an all time low vs the Dollar.
    • Following, historic UK tax cuts funded by the largest government borrowing since 1972. 
  • The Rand unlikely to register any meaningful gains in this environment.
    • Locally load shedding continues and likely to have an impact on GDP, that will not help the ZAR.

Significant Market Data




·         14h30 : US DURABLE GOODS -0.5% EXPECTED MOM , VS 0% PREVIOUS

·         16H00 : US NEW HOME SALES 0.5M  MOM ( UNCHANGED ).


·         14h35  : FED SPEAK : ATLANTA :  RAPHAEL BOSTIC (  a known DOVE ).

·         16h10 :FED SPEAK : ST LOUIS : JAMES BULLARD (  a known HAWK).


·         11h30 :  SA PPI YOY 17.6% YOY VS 18% YOY PREVIOUS

·         14H00 : GERMAN INFLATION 9.8% YOY PREVIOUS 7.9% YOY

·         14H30 : US GDP GROWTH QoQ -0.6% EXPECTED VS -1.6% QOQ


·         11h00 : EUROZONE  INFLATION :   9.6% EXPECTED VS 9.1% PREVIOUS




  • The ZAR continues to weaken on the back of global risk off sentiment.
    • The new UK fiscal policies and decade high inflation, causing investors to exit Risk assets and enter into the safety of the US Dollar
    • The Euro the lowest level since 2002 (0.9684), the UK Pound at one stage hitting 1.0327 ( the closest it’s ever been to parity).
    • This morning we opening above R18/$.
    • Expect some early session selling as exporters take advantage of a near 40 cent windfall/gain since the open on Friday.
    • The profit-taking likely to drive USDZAR below the figure to 17.9100 , before more Dollar buying is expected.
  • We expect wider than normal ranges, due to increased volatility and uncertainty.
  • Any changes in the UK policy could as easily see a reversal and a return to risk.
    • ** this is the hopeful view at the moment.
  • Trade :  BUY USDZAR

Expected Ranges

  • USDZAR :  Expect a range 17.7200-18.2900
    • Importers 17.9100-17.7200
    • Exporters 18.1000-18.2900
  • EURZAR :  Expect a range of 17.2200-17.6600
    • Importers 17.3000-17.2200
    • Exporters 17.5000-17.6600
  • GBPZAR :  Expect a range of 18.8000-19.4800
    • Importers 18.90000-18.8000
    • Exporters  19.2800-19.4800


  • USDZAR 18.0200
  • EURZAR 17.4000
  • GBPZAR 19.1200


  • US stock futures edged lower on Monday after the major averages sold off last week, as the Federal Reserve’s steadfast commitment to bringing down inflation rattled markets.
  • Futures contracts tied to the three major indexes all traded in negative territory.
    • Last week, the Dow fell 4% to its lowest levels since November 2020, while the S&P 500 and Nasdaq Composite tumbled 4.65% and 5.07%, respectively.
    • Those moves came as the Fed raised interest rates by 75 basis points for the third time in a row as inflationary pressures remain elevated.
    • The central bank also put an end to all hopes for a dovish pivot, seeing rates rising as high as 4.6% in 2023 with no rate cuts until 2024.
  • Several Fed officials are also scheduled to speak at various events this week.


  • US 10 Year Note Bond Yield was 3.76 percent on Monday September 26, according to over-the-counter interbank yield quotes for this government bond maturity.
  • The yield on Britain’s 10-year Gilt jumped to above 4.1% on Monday, the highest level in 12 years, after jumping by as much as 38bps on Friday, amid persistent concerns over the government’s credibility and uncertainty over how new mini-budget will be paid.
    • On Friday, the new government announced a plan to boost growth that would include scrapping the 45p top rate of income tax and replacing it with a 40p rate and a cut in stamp duty on home sales.
    • The UK Debt Management Office said it was raising its debt issuance plans for the current financial year by GBP 72.4 billion, reflecting the funding required for all measures announced by the new finance minister.


  • The Dow declined 486 to 29,590
  • The SP500 declined 64 to 3,693
  • The Nasdaq  fell to 10,867 after declining  198


  • Asian markets lower across the region following another negative week on Wall Street.
    • In Japan, the Nikkei 225 declined 2.66% to 26,431, closing at its lowest levels in over two months and taking cues from a negative lead on Wall Street.
      • Risk assets remain under pressure from increased inflationary pressures, rising interest rates and global recession fears.
        • Investors also reacted to weak domestic manufacturing data, while Japan’s services sector rebounded in September.
        • Last week, the Bank of Japan decided to maintain ultra-easy policies, and also intervened in the JPY FX market, to stop further yen depreciation and capital outflows.
        • All sectors in Japan declined on Monday.
    • In Australia, the ASX 200 fell 1.6% to close at 6,469, sliding to its lowest levels in three months. The index weighed down by energy and mining stocks.
      • Traders fearful that further monetary tightening aimed at bringing down inflation would tilt the global economy into a recession.
      • Elevated bond yields also added to the bearish sentiment, with benchmark Australian 10-year yields hovering around 4%, the highest since June.
      • Energy stocks declined as oil prices fell sharply last week, with sector leaders Woodside Energy and Santos Ltd losing 5% and 7.3%, respectively.
      • Mining shares also dropped on subdued metals prices, including BHP Group (-5.2%), Rio Tinto (-5.6%).
  • The US dollar hit the 114 mark on Monday for the first time since May 2020, lifted by the Federal Reserve’s aggressive plan to stamp out inflation and escalating risk of a global recession.
    • The Fed raised interest rates by 75 basis points for a third consecutive meeting last week and forecasted rates to peak at 4.6% next year with no cuts until 2024.
    • The dollar also benefited from safe haven demand as global economic uncertainties prompted investors to rush for the greenback’s safety.
      • It surged to an all-time low against the UK POUND as the new administration in the UK unveiled historic tax cuts funded by the largest government borrowing since 1972.
    • The dollar also scaled two-decade highs against the euro and over two-year highs against the antipodean currencies, while recouping recent losses against the yen following Japan’s intervention.
  • The UK pound extended losses for a second session to a fresh record low of $1.06, after falling 5% at one point to around $1.0327 during Asian trading hours.
    • Cable falling, as the UK finance minister said during the weekend that there’s “more to come” on tax cuts.
    • On Friday, the new government announced a plan aimed to boost growth that includes several tax cuts, including the cancellation of a planned rise in corporation tax to 25%, keeping it at 19%, and will cost a total £45 billion by 2026-27.
    • The announcement was not pleased by investors, who worry the mini-budget will raise the country’s debt to unsustain levels, at a time of a looming recession.
    • The new plan is also raising credibility problems, with investors now speculating about an emergency BoE rate hike to curb the sterling plunge.
  • Crude oil
    • WTI crude fell below $78 /bl on Monday, and Brent crude fell below $85 per barrel on Monday, entering the fifth week of losses.
      • Oil prices weighed down by fears that further monetary tightening would tilt the global economy into a recession and hurt energy demand.
      • Last week, the Fed led a raft of interest rate hikes by central banks across the globe aimed at taming elevated inflationary pressures.
      • A rallying dollar also pressured energy markets as it makes dollar-priced commodities more expensive for buyers holding other currencies.
        • Meanwhile, analysts are suggesting that weaker oil prices could prompt further OPEC+ intervention.
      • The cartel likely to announce more cuts in production to support the market.
  • Gold prices declined past $1,640/oz. Bullion under pressure following a rallying dollar and surging Treasury yields that reflected expectations for tighter monetary policy and slowing global growth.
    • After the Fed led a raft of central bank rate hikes this week, to increase to bring down inflation.
    • The ECB is also expected to raise rates further, with ECB board member Isabel Schnabel saying Thursday that elevated inflationary pressures in the euro zone are likely to be more persistent than anticipated.
    • Higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal.
    • Gold also lost its shine as a store of value in times of economic uncertainties as the US’ relative economic strength and the Fed’s aggressive stance against inflation lifted the dollar at the expense of other safe-haven assets.

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