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Morning NOTE

28 July 2023


The ZAR weakened after US GDP and Durable goods orders all surprised the market to the upside.

Market Movement Today:

  • The ZAR  weakened from 17.4100 to 17.8100 after US GDP surprised to the upside.
    • The Dollar spiking higher across the board after US yields spiked beyond 4%.
    • Traders once again flipping in favour of additional rate hikes.
    • The result a drop risk assets as the benchmark SP500 declined sharply from 4600 to 4525.
    • In addition, Gold prices dropped sharply, with the Dollar once again firmly above 101.00
    • In an amazing 24 hour turn around the Dollar once again back in favour.
    • Analysts also warning of the rising oil price as a “risk “ for secondary inflationary effects.
    • This likely to keep the Fed on hawkish alert.
  • Trade :  BUY  USDZAR on dips.

Data This week

  • 14H30 : US CORE PCE MOM  +0.2% VS +0.3% PREVIOUS

Market Highlights:

  • The Rand retreated sharply after registering early session gain .

  • The local unit reaching 17.4100 before falling sharply to 17.8800.
  • The US Dollar rising sharply in afternoon trade after the release of US economic data.
  • In a trifecta of bullish data, the US GDP , Durable Goods all surprised to the upside and weekly unemployment claims fell sharply.
  • The US economy expanded an annualized 2.4% QOQ in the second quarter of 2023, higher than 2% in the previous period and way above market expectations of 1.8%.
  • Non-residential fixed investment accelerated sharply (7.7% vs 0.6%), led by a rebound in equipment (10.8% vs -8.9%) and intellectual property products (3.9% vs 3.1%).
  •  Adding to hawkish sentiment were , the ECB hiking rates to 25 bps , and the BOJ increasing the yield band.
  • Traders , also casting an eye towards to rising oil and wheat prices with fears of secondary inflation effects.
  • The benchmark 10YT above 4% and this likely to be Dollar supportive and risk asset negative.

Markets this morning:
USDZAR 17.7700
DOLLAR 101.74
EURUSD 1.0982
SP500 4,593
GOLD  1951
US10YT 4.02%


  • USDZAR : 17.8600
  • EURZAR : 19.6100
  • GBPZAR : 22.7700


Weather warning

  • A strong cold front accompanied by snowfall and heavy rainfall is expected to affect the Cape provinces this weekend.
    • The SA Weather Service predicts that heavy rains could lead to flooding.
    • Snowfall may extend into the Drakensberg region of KwaZulu-Natal and the extreme southern parts of the Free State on Sunday.
    • Heavy rainfall, icy conditions, rough seas, snow, and strong to gale-force winds are expected over parts of the Cape provinces this weekend.
    • The central and eastern parts of the country will also experience cold to very cold conditions from Saturday evening into Sunday. Source SAWS

Eskom cable theft

Large parts of Ferndale in Randburg, Johannesburg, are expected to be without power for a considerable part of the week.

  • It was reported that the body of a suspected cable thief was found burnt beyond recognition inside a substation.
  • City Power spokesperson Isaac Mangena said technicians who attended to the substation following a power outage complaint discovered the body on Tuesday.
  • “People had logged a call and when they [technicians] got to the substation, they found that it had tripped and there was a body inside.
  • It was burnt beyond recognition. Source : News24



  • US stocks finished in the red on Thursday, as strong economic data showed the resilience of the US economy paving ways for the Fed to extend its tightening cycle in September.
  • The US GDP expanded by 2.4% in the second quarter, surpassing market expectations of a 1.8% increase, while durable goods orders surged and jobless claims declined to multi-month lows.
  • The data triggered a surge in treasury yields, enough to send the Dow 238 points lower, snapping 13 straight sessions of gains, as Microsoft (-2.1%) and Visa (-1.1%) dragged the most.
  • Meanwhile, the S&P 500 and the Nasdaq 100 lost 0.6% and 0.5% respectively.


  • The yield on the US 10-year Treasury note rose to nearly 4% on Thursday, as strong US data reinforced the view that Fed may be forced to continue with its tightening campaign.
  • The US economy grew at a faster 2.4% rate in the second quarter, well above market expectations of 1.8%, underscoring the economy’s resilience to higher interest rates.
  • Also, initial jobless claims unexpectedly sank to their lowest in five months, showing that the labour market remains tight. 

Market Close:

  • DOW -237 TO 35,282
  • SP500 -29 TO 4,537
  • NASDAQ -77 TO 14,050


  image: Trading economics

Asian markets

  • Stocks lower after US data,  raised the possibility of more rate hikes.
    • In Japan, the Nikkei 225 Index dropped 0.4% to close at 32,759, giving back some gains from the previous session.
      • This morning the Bank of Japan maintained its policy of ultra-low interest rates but changed its language to make its yield curve control policy more flexible.
      • The central bank kept guidance allowing the 10-year yield to move 0.5% around the 0% target, but stated that those would be “references” rather than “rigid limits.”
      • Japanese shares also tracked losses on Wall Street overnight as strong US economic data raised concerns that the US Federal Reserve could tighten policy further.
      • Technology stocks led the decline and Japanese banks rallied on the prospect of higher domestic rates, led by Mitsubishi UFJ (5.3%) and Sumitomo Mitsui (4.3%). Source Reuters


Oil prices steady after US data.

  • Brent crude futures rose above $83 per barrel on Thursday.
    • Prices remain near a three-month high hit earlier in the week, as the prospect of tighter global supply and a rebound in Chinese demand supported the market.
    • Oil prices have rallied more than 10% this month due to voluntary output cuts by Saudi Arabia and Russia, as well as indications from OPEC+ of its willingness to take further action.
    • Chinese authorities also pledged to step up policy support to shore up the economy, bolstering the outlook for the world’s top crude importer.
    • Meanwhile, oil prices came under pressure on Wednesday after the US Federal Reserve raised interest rates by 25 basis points, stoking concerns about overall demand.
    • The European Central Bank tightened policy further on Thursday and signalled further rate increases amid persistent inflation. Source: Gulf News


Precious metals sharply lower after US data surprise.

  • Gold erased early gains and fell past $1,950/oz on Thursday, retreating from the two-month high of $1,980/oz from July 18th.
  • Earlier  hot economic data strengthened the case for the Federal Reserve to raise interest rates in September, increasing the opportunity cost to hold non-interest-bearing precious metals.
  • The US GDP expanded by 2.4% in the second quarter of 2023, well above market expectations of a 1.8% increase.
  • Additionally, durable goods orders soared past expectations and both initial and continuing jobless claims plunged to multi-month lows.
  • Yesterday, the Federal Reserve raised its funds rate by 25bps to 5.5%, as widely expected by markets, and kept the door for future rate hikes open.  Source: Kitco


Dollar higher on the back of strong US Data.

  • The US dollar index jumped to above 101 on Thursday.
    • The move  erasing early session losses after key data supported the case for the FED to extend its tightening campaign in its upcoming September meeting.
    • Fresh data showed that the US GDP expanded by 2.4% in the second quarter, well above market expectations of 1.8%, underscoring the economy’s resilience to higher interest rates.
    • Also strengthening the hawkish argument, initial jobless claims unexpectedly sank to their lowest in five months,
      • Continuing claims also plunged to their lowest in six months to show that the labour market remains tight.
    • Recall, on Wednesday , the FOMC implemented a widely expected 25 basis point rate hike.
    • Fed Chair Jerome Powell insisted that the central bank would take a “data-dependent” approach going forward when determining additional hikes. Source FX news

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