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Morning NOTE

28 June 2023


The ZAR weakened after the rebound in the Dollar and comments from the IMF than higher rates are needed to fight inflation.


The Rand weakened nearly 20 cents after the Dollar rebounded in early Asian trading.

  • The Dollar finding support from stronger than expected economic data, after US durable goods and Home sales data rebounded.
    • Ahead of Powell’s speech this afternoon the market also digesting comments from Gita Gopinath, first deputy managing director of the IMF.
      • She called for higher rates and also for rates to remain higher for longer, to reduce inflation across the globe,
      • Central bankers remain of the opinion, and this strikingly includes SARB Governor Lesetja Kganyago, who reiterated that higher inflation is worse than an economic slowdown.
        • Central bankers are determined to get inflation down to their set targets of around 2%.  
      • In SA the MPC band remains 3%-6%, but there have been rumours of the SARB looking at reducing the band to 2%-4%.
        • This would likely require higher SA interest rates.
  • What remains clear is that, interest rates are likely to remain elevated across the globe and this would hamper the advance of the Risk asset complex.
    • This morning the SP500 and Nasdaq remains off its recent highs and this are also seen with the ZAR off recent highs as well as other EMFX.
    • The Dollar the primary beneficiary as the Buck firmly above 102.60.

Risk today : Jerome Powell speech.

Data This week



  • 11H30 : SA INFLATION  PPI  6.8% YOY VS 8.6% PREVIOUS
  • 14H30 : US GDP 1.4% EXPECTED VS 2.6% PREVIOUS


  • 08h00 : SA MONEY SUPPLY M3  11.3% VS 10.2% PREVIOUS
  • 11H00 : EU  INFLATION  5.6% VS 6.1% PREVIOUS

Market Movement Today:

  • The Rand weakened in early Joburg trading following a rebound in the Dollar.
  • The ZAR lost more than 20 cents at the opening salvo on the back of stronger Dollar.
  • The unit reaching 18.67000 vs 18.4100 on Tuesday.
  • Following up on last week’s hawkish central bank actions and comments, the IMF has now weighed in on global inflation.
    • The Fund’s deputy managing director calling on central banks to do more to combat inflation.
    • Inflation is widely perceived to hurt the poor more than rich.
    • Central bankers including the SARB governor, stating that fighting inflation is more important that avoiding a recession.
  • In addition, after a strong Risk asset performance in New York, we find higher yields supporting the Dollar in early Wednesday trading.
    US durable goods and Home sales data surprised markets to the upside allowing for investors to bet that the economy could withstand higher rates.

    Higher yields likely to result in weaker ZAR.

    Risk events remain the Fed Chair Powell as well as US GDP and US PCE later in the week.

  • Trade : BUY USDZAR on dips (i.e. SELL ZAR)

Markets this morning

  • USDZAR 18.6300
  • DOLLAR 102.60
  • EURUSD 1.0948
  • SP500 4,369
  • GOLD  1910
  • US10YT 3.76%

Expected Ranges:

  • USDZAR : Expect a range 18.3300-18.7200
    • Importers : 18.4600-18.3300
    • Exporters : 18.5900-18.7200
  • EURZAR : Expect a range of 20.1300-20.4600
    • Importers : 20.2400-20.1300
    • Exporters : 20.3500-20.4600
  • GBPZAR : Expect a range of 23.4100-23.8000
    • Importers : 23.5400-23.5100
    • Exporters : 23.6700-23.8000


  • USDZAR 18.5700
  • EURZAR 20.2900
  • GBPZAR 23.6600



  • Eskom is changing its grid access rules to deal with constraints.
  • Currently, allocations are made to projects based on a first come, first served basis – which effectively hogs grid space.
  • But now Eskom wants developers to demonstrate that their projects are shovel-ready in order to be granted allocations.
  • Eskom’s general manager for operations enablement, Velaphi Ntuli, said the changes had come about given grid constraints that are escalating with each public power procurement process.
  • In addition, the opening up of the energy market for Independent Power Producers (IPPs).Source : ESKOM


  • The Oldenburg court in Germany says it hasn’t yet worked out how to get former Steinhoff International CEO, Markus Jooste, to stand trial abroad.
  • The court recently issued a warrant of arrest for Jooste, following his absence in the dock alongside two other former German Steinhoff managing directors.
  • Their trial began in April and it was expected that Jooste be tried simultaneously. Source EWN


Equities lower after the USA and China clashed on AI technology as well as the potential for higher rates.

  • On Tuesday, meanwhile, the Nasdaq rallied 1.65%, the S&P 500 jumped 1.15% and the Dow gained 0.63%, with ten out of the 11 S&P sectors finishing higher.
    • Those moves came as strong housing and durable goods orders data suggested the US economy remains resilient in the face of persistent inflation and high interest rates
  • However, this morning we facing a different picture.
    • US stock futures dropped on Wednesday after the Wall Street Journal reported that the US government is considering new restrictions on exports of artificial intelligence chips to China.
    • Nasdaq 100 futures fell 0.4%, S&P 500 futures lost 0.2% and Dow futures shed 0.1%.
    • Tech semiconductor heavyweights Nvidia and AMD losing 3.1% and 2.4%, respectively, in after-hours trading.
  • Investors now look ahead to Federal Reserve Chair Jerome Powell’s appearance before a policy panel in Europe on Wednesday for fresh clues on the rates path. Source : CNBC

Government bond Yields after IMF calls for higher interest rates and Central banks to do more to combat inflation.

In the USA

  • The yield on the US 10-year Treasury rose to 3.76% .
  • Investors weigh fresh economic data pointing to a resilient economy and prospects that interest rates will continue to march higher.
  • Durable goods orders beat forecasts for a third consecutive month,
    • In addition, new homes sales surged to the highest level in over a year and the CB consumer confidence hit the highest level since early 2022.
  • Last week, Fed Chair Powell reiterated to the Congress that interest rates would need to go higher and signalled two more rate hikes.
    • Investors await further hints on the future rate path and will closely monitor appearances from several Fed officials.
    • Market participants are currently assigning a nearly 77% chance the Fed will deliver a 25bps increase in the fed funds rate in July. Source : Reuters


  • DOW -+212 to 33,926
  • SP500 +48 to 4378
  • NASDAQ +219 to 13,555

image: Trading economics


Asian markets
Eastern markets higher after a strong close in New York.

  • In Japan, the Nikkei 225 Index gained 2.02% to close at 33,194, reversing losses from the previous session.
    • Japanese stocks taking cues from a strong lead on Wall Street. Upbeat US data boosted the economic outlook despite persistent inflation and higher borrowing costs.
    • Technology stocks led the charge.
    • In addition, a weak Yen cited as making stocks of companies who export particularly attractive.
  • In Australia, ASX 200 Index climbed 1.1% to close at 7,197 on Wednesday. The index rising for the second straight session and tracking gains on Wall Street overnight.
    • Strong US data pointed to a resilient economy despite persistent inflation and higher borrowing costs.
    • Investors also digested softer-than-expected domestic inflation data which bolstered speculations that the Reserve Bank of Australia could be near the end of its tightening cycle.  Source : Reuters

Oil prices higher after surprise drop in US inventories.  

  • WTI crude futures rose to $69/bl on Wednesday as investors digested industry data showing US crude inventories declined by about 2.4 million barrels last week.
    • The drop exceeding forecasts for a 1.5 million barrel decline.
    • US gasoline inventories also fell by about 2.9 million barrels compared to estimates for a 126,000 barrel draw.
    • On Monday, oil prices jumped after a short-lived insurrection by a paramilitary group in Russia over the weekend stoked fears of supply disruptions.
    • However, the market reversed on Tuesday.
    • US WTI prices losing more than 2% as the prospect of further monetary tightening weighed on the outlook for the global economy and future energy demand.
    • A slow post-pandemic recovery in China also clouded the demand outlook. Source: Gulfnews

Precious metals lower on US rates and calls by the IMF for Central bankers to do more.

  • Gold held below $1,920 /oz on Wednesday.
    • Prices  hovering near its lowest levels in three months as upbeat US economic data supported the case for further interest rate hikes from the Federal Reserve.
    • Latest data showed that US consumer confidence jumped to a nearly 1-1/2-year high in June, while business spending, durable goods orders and home sales held up in May.
    • Last week, Fed Chair Jerome Powell said that further rate increases are likely ahead as inflation remains too high.
    • The ECB also said it expects euro zone inflation to remain elevated, making the case for further policy tightening.
    • Investors now look ahead to Powell’s appearance before a policy panel in Europe on Wednesday for fresh clues on the rates path.|source : Kitco

The Dollar recovered off recent low’s following calls for more rate hikes by the IMF.

  • The dollar index steadied around 102.6 on Wednesday after seeing small losses in the past two sessions,.
  • Strong US data suggested the economy remains resilient in the face of persistent inflation and higher borrowing costs, supporting the case for further Federal Reserve policy tightening.
  • US consumer confidence jumped to a nearly 1-1/2-year high in June, while business spending, durable goods orders and home sales held up in May.
  • Last week, Federal Reserve Chair Jerome Powell said that further rate increases are likely ahead as inflation remains too high.
    • Other Fed officials mirrored his statements, with San Francisco Fed Bank President Mary Daly suggesting that two more rate hikes this year is a “very reasonable” projection.
    • Investors now look ahead to Fed Chair Jerome Powell’s appearance before a policy panel in Europe on Wednesday for fresh clues on the rates path. Source : Forexnews

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