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Morning NOTE

27 September 2022


The ZAR recovered in Asian trading after a bounce in Eastern stock markets.


  • The Rand benefitted from a muted rally in Asian trading as, a fairly low level of risk appetite returned.
    • The local unit recovering on the back of a “ stall in the decline” of risk assets  to gain nearly 1.2%.
  • Unfortunately the global back drop looking bleaker by the day as US and now UK yields continue to spike higher.
    • The yield on Britain’s ten-year Gilt rose further above 4.2%.
    • It was the highest since February 2010 after the BoE issued a statement saying it will not hesitate to change interest rates as necessary to return inflation to the 2% target. 
      • This was in direct response to the UK fiscal stimulus that many feel could fuel inflation further.
    • Across the pond, the US 10-year Treasury yield hit 3.9% for the first time since April 2010 with markets pricing in another 75 bps hike in November. 
  • On the FX side, the dollar fell to 113.5 on Tuesday, easing slightly from a fresh 20-year high of 114.5 reached in the previous session.
    • Traders  taking some profits and paused for breath following a sharp rally.
  • Locally we await, SA PPI on Thursday to get an idea on inflationary pressures in the SA economy .
    • In addition, the SARB also revised forecasts for the economy to grow 1.9% in 2022 from a previous estimate of 2%.
    • This as severe load-shedding is likely to get worse and weigh on domestic activity in the coming months. .

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 likely to benefit from the support in Asia for risk assets as the Dollar takes a breather.
    • We likely to see a pullback below 17.9000 to 17.7500, which will present short term importers with opportunities to BUY USD.
    • Whereas a break of 18.1000 opens up 18.2500.
  • Weighing in the local unit remains higher G7 yields as well as continued load shedding .
    • This after Ramaphosa confirmed , the country will continue have power cuts for the foreseeable future.
  • Trade :  BUY USDZAR

Expected Ranges

  • USDZAR :  Expect a range 17.7300-18.2200
    • Importers 17.8900-17.7300
    • Exporters 18.0600-18.2200
  • EURZAR :  Expect a range of 17.2200-17.4900
    • Importers 17.17.2700-17.2200
    • Exporters 17.3900-17.4900
  • GBPZAR :  Expect a range of 19.1400-19.5900
    • Importers 19.2200-19.1400
    • Exporters  19.4600-19.5900


  • USDZAR 17.9700
  • EURZAR 17.3200
  • GBPZAR 19.3700



  • Jacob Zuma , backed Dlamini- Zuma to lead the ANC in the upcoming leadership battle vs Cyril Ramaphosa.
    • He also put his hand forward to be the party Chairman.
    • He also said, he has not shifted from the views he held in 2017. EWN
  • ANC national chairperson Gwede Mantashe said that alliance partners must recognise that they can either destroy the movement and make it disappear or come to their senses and rebuild it.
    • This after he was booed off the stage at a Cosatu rally. EWN
  • The DA is calling for the House to adopt a motion that an ad hoc committee be established to probe the role played by various state agencies in the alleged cover-up of the farm burglary.
  • President Cyril Ramaphosa says South Africa will not see an end to power cuts any time soon.
    • The president’s Monday newsletter focuses exclusively on the country’s power crisis and the attempts being made to address it.
    • Over the last two weeks, South Africans have been experiencing the most severe bout of power cuts due to breakdowns at the country’s power stations.
    • The president’s newsletter this week is titled ‘No quick fix for load shedding but real progress is being made’. News24


  • In regular trading on Monday, the S&P 500 fell 1.03% to close at its lowest level this year, while the Dow and Nasdaq Composite lost 1.11% and 0.6%, respectively.
    • Ten out of eleven S&P sectors declined, led by real estate, energy and utilities.
    • Those moves came as the benchmark 10-year US yield surged to its highest levels in over a decade around 3.9%, while a relentless dollar rally raged on.
  • However,
    • Futures are higher on Tuesday after the major averages declined for 5 straight days, as risk aversion dominated sentiment amid surging bond yields and heightened currency market volatility.
      • Investors also continued to grapple with the prospect of further monetary tightening from the Federal Reserve.


  • The US 10YT  hit 3.9% for the first time since April 2010 as expectations of higher interest rates to rein on sky-high inflation continued to dent appetite for government debt.
    • The FED has hiked interest rates for a third consecutive meeting in September to a target range of 3% to 3.25%, with money markets now pricing in another 75 bps hike in November.
    • Policymakers also significantly cut their outlook for 2022 economic growth, expecting just a 0.2% gain in GDP, down from 1.7% in June.
    • The 2-year Treasury yield surged above 4.3%, the highest since 2007, widening the gap in the former and further inverting the yield curve.
  • Across the pond
    • The yield on Britain’s 10YG rose further above 4.2%, the highest since February 2010.
    • This after the BoE issued a statement saying it will not hesitate to change interest rates as necessary to return inflation to the 2% target.
    • Traders ramped up bets on the scale of interest rate hikes by the BoE after the pound tumbled to record lows against the USD amid persistent concerns over the government’s credibility.
      • In addition, much uncertainty over how the new mini-budget will be paid.
      • Money markets now price in more than 200 bps of increases by the BoE’s next meeting in November, four times the size of its last hike.


  • The Dow  fell 329 to 29,260
  • The SP500 fell 38 to 3,655
  • The Nasdaq fell 65 to 10,802


  • Asian markets higher on what many are calling a relief rally.

    • In Japan, the Nikkei 225 rose 0.53% to close at 26,572, rising from over two-month lows as markets stabilized following a sharp sell-off.
      • However, surging global interest rates and heightened recession fears kept sentiment in check.
      • BOJ Governor Haruhiko Kuroda also warned of elevated downside risk to Japan’s economy given a challenging global macroeconomic environment.
        • He added the central bank will continue to support the economy with ultra-loose monetary policy.
      • Nearly all sectors in Japan rebounded on Tuesday.
  • The US dollar fell below 114 on Tuesday, easing slightly from a fresh 20-year high of 114.5 reached in the previous session as investors took some profits and paused for breath following a sharp rally.
    • Meanwhile, the greenback remains at historical highs against its major peers on expectations that the Federal Reserve will tighten monetary settings further to stamp out surging inflation.
    • A slew of Fed officials indicated their commitment to the fight against inflation on Monday, even at the risk of some economic pain and further market volatility.
    • Haven demand also continued to support the dollar as investors rush for its safety amid a highly uncertain global economic outlook and mounting recession risks.
    • The dollar held near multi-decade highs against the euro and the yen, while hovering close to an all-time low against the sterling amid a lack of confidence in Britain’s fiscal strategy.
  • 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 futures rose to  $78/bl as Iraq Oil Minister Ihsan Abdul Jabbar said that OPEC+ was monitoring oil prices as it sought to maintain market balance.
    • Investors also remained cautious about the potential for further supply disruptions due to the prolonged Russia-Ukraine war, as well as the looming European Union ban on Russian crude set to take effect in December.
    • Meanwhile, the US oil benchmark held near its lowest levels since early January as tightening monetary conditions aimed at bringing down high inflation escalated concerns about a global recession and lower energy demand.
    • Oil prices were also dragged down by a rallying dollar that makes greenback-priced commodities more expensive for buyers holding other currencies.
  • Gold prices climbed toward $1,630 an ounce on Tuesday, recovering after the dollar rally took a breather.
    • Meanwhile, the yellow metal remains close to its lowest levels in 2-½-years on expectations that the US Federal Reserve will tighten monetary settings further to stamp out surging inflation.
    • Investors also digested an OECD report where it downgraded its global economic growth forecast to 2.2% in 2023 from an earlier projection of 2.8%.
      • The OECD citing aggressive monetary tightening in advanced economies and the prolonged Russia-Ukraine war.

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