The ZAR recovered on Monday after nerves around the banking crises subsided.
The Rand recovered from weaker levels after stocks rebounded in the USA following comments that the banking crises might be subsiding.
- The Dollar declining on the back of the news, that US authorities were determined to shore up confidence.
- The Treasury indicating it is considering an expanded emergency lending facility and assuring markets that the US banking system was “sound and resilient.”
- The Greenback declining to 102.5 on Tuesday, falling for the second straight session as fears over the recent banking turmoil started to fade.
- The result a decline in demand for the safe-haven currency.
- In addition, reports indicate that outflows from small lenders to banking giants have slowed.
- The Euro, Pound all rallying vs the Dollar. The Rand however adopting a wait and see approach.
- In the UK, the Pound also rose after Bank of England Governor Andrew Bailey said further monetary tightening would be required if signs of persistent inflationary pressure became evident.
- He also said there were “big strains” in the global banking sector, but added that banks in Britain were resilient and able to support the economy.
- Investors also swopping out of US treasuries (safe havens) in to Risk assets (Sp500).
- The result a jump in Us yields to 3.52% and the SP500 rallying to 3990.
- Following the recovery in New York, we have Asian markets higher as positive updates surrounding the financial sector raised hopes that the worst of the recent banking turmoil may be over.
- First Citizens Banc Shares agreed to buy significant holdings of Silicon Valley Bank,
- However; whilst uncertainty continues, the Rand will continue to get directional clues from the “banking sector confidence”
- Any positive news – will lead to ZAR GAINS ; and
- Any negative news – will lead to ZAR Losses.
Data this week
- 08h00 : PRIVATE SECTOR CREDIT YOY 8.62% EXPECTED VS 8.42% PREVIOUS
- 11H30 : SA PPI YOY 13.1% EXPECTED VS 12.7% PREVIOUS
- 14H30 : US GDP GROWTH RATE 2.7% EXPECTED VS 3.2% PREVIOUS
- 14H30 : US JOBLESS CLAIMS 196K EXPECTED
- 15H00 ; SOUTH AFRICA SARB MPC RATES DECSION
- EXPECTED 25 BPS HIKE .
- PRIME OVERDRAFT AT 11%
- 14H30 : USA PCE 5.1% EXEPCTED VS 5.4% PREVIOUS
Market Movement Today:
- The ZAR opened stronger, following a Risk asset rally in New York, that continued in Asia.
- Markets relieved following news that the US government would step in to support any banks in crises.
- In addition First citizens Banc acquired deposits and loans from the now collapsed SVB.
- The Dollar lower cross the board on this news,
- As investors swopped out of US treasuries (safe havens) in to Risk assets (Sp500).
- The result a jump in US yields to 3.52% and the SP500 rallying to 3990.
NB: Two way risk remains prevalent as we wait for clarity on the amount of deposit outflows for the week.
And any spike, would likely lead to a rally in the Dollar.
Trade : We expect the ZAR to be supported in this environment and for the first time in a while ,
short term exporters should look to take advantage of current levels.
- USDZAR : Expect a range 18.1400-18.4100
- Importers 18.2300-18.1400
- Exporters 18.3200-18.4100
- EURZAR : Expect a range of 19.6400-19.8500
- Importers 19.7800-19.8500
- Exporters 19.7100-19.6400
- GBPZAR : Expect a range of 22.5400-22.6300
- Importers 22.4500-22.3600
- Exporters : 22.5400-22.6300
- USDZAR 18.2600
- EURZAR 19.7500
- GBPZAR 22.5000
Public sector wage strike
- SA’s public sector workers look set to accept the government’s final 7.5% salary increase offer by Wednesday, bringing an end to pay talks for 2023.
- The state, which initially tabled an offer of 4.7% in February, presented a revised offer of 7% earlier this month following vehement rejection by public sector unions.
- That too was rejected, which pushed the government to its new offer of 7.5%.
- The PSA represents nearly 240 000 workers.
- President Cyril Ramaphosa will visit a number of flood-affected areas in Eastern Cape on Tuesday morning.
- Flooding caused major damage to parts of the coastal province last week. Public infrastructure including roads, bridges and people’s homes were destroyed.
- Four people were confirmed dead, while one person was still missing.
- The OR Tambo District Municipality was in a state of disaster since February, due to heavy rains affecting areas in four of the five municipalities there.
- The most affected area was Port St Johns, where houses were flooded on 23 March. EWN
- SA’s power firm Eskom returned two hydropower plants to Uganda’s government on Tuesday after Ugandan authorities declined to renew its licence, Uganda’s energy minister said.
- Under a 20-year concession signed in 2002, Eskom had been running the two plants located at the source of the River Nile in Jinja, about 90 km (56 miles) east of the capital Kampala.
- Both plants have a combined installed generation capacity of 380 megawatts. Reuters
- US stock futures edged higher on Tuesday after financial shares gained as concerns over the banking sector continued to ease.
- Futures contracts tied to the three major indexes were all up about 0.2%.
- In regular trading on Monday, the Dow and S&P 500 rose 0.6% and 0.17%, respectively, with eight out of 11 S&P sectors finishing higher led on the upside by energy, financials and industrials.
- Meanwhile, the tech-heavy Nasdaq Composite tumbled 0.47%, snapping a two-day advance.
- The rally in bank shares came after reports said that First Citizens BankShares Inc agreed to buy large parts of Silicon Valley Bank.
- while CNBC reported that outflows from small institutions to banking giants have slowed.
- Meanwhile, technology stocks came under pressure from a jump in Treasury yields, with the benchmark 10-year yield rising back above 3.5%.
- Investors now look ahead to Federal Reserve’s Vice Chair for Supervision Michael Barr’s testimony before the Senate Banking Committee. Reuters
- The US 10-year Treasury yield, seen recovered to trade at 3.52% after investors exited safe-haven assets after assurances from officials that the global banking sector’s health remains intact.
- This following the collapse of various banks over the last two weeks.
- Earlier, Minneapolis Federal Reserve President Neel Kashkari was among the first policymakers to warn that recent stress in the banking sector
- and the possibility of a follow-on credit crunch brings the world’s largest economy closer to recession.
- Meanwhile, the Federal Reserve delivered dovish rhetoric along with the loosely-expected 25bps hike in interest rates,
- indicating that it was on the verge of pausing its tightening campaign to address recent risks to financial stability. CNBC
image: Trading economics
The US dollar
- The dollar index lower slipped toward 102.5 as fears over the recent banking turmoil started to fade, hurting demand for the safe-haven currency.
- US authorities also aimed to shore up confidence by considering an expanded emergency lending facility and assuring markets that the US banking system was “sound and resilient.”
- All eyes now turn to a key measure of US inflation (PCE) and several speeches from Fed officials this week.
- Investors welcomed reports that First Citizens BancShares agreed to buy significant holdings of Silicon Valley Bank, while CNBC reported that outflows from small institutions to banking giants have slowed. Fx news
Asian markets tracking Wallstreet higher following news that the deposit outflows have slowed down, and that US officials will continue to provide support to the sector.
- In Japan, the Nikkei 225 rose 0.15% to close at 27,518, rising for the second straight session to the highest in two weeks as fears of a wider banking contagion continued to ease.
- US financial shares rallied on reports that First Citizens BankShares agreed to buy large parts of Silicon Valley Bank.
- Japanese banks led the advance, with strong gains from Mitsubishi UFJ (1.7%), Sumitomo Mitsui (2.7%) and Mizuho Financial (2.5%).
- In Australia, the ASX 200 jumped 1.04% to close at 7,034, with financial stocks higher as well as mining and energy stocks leading the advance on firmer commodity prices.
- BHP Group (1.9%) and Woodside Energy (4.5%) while financials saw Macquarie Group (1.8%), ANZ Group (0.9%) and Westpac (1.3%) . reuters
- WTI crude futures held around $73/bl on Tuesday after jumping more than 5% in the previous session.
- Supply concerns were raised as a legal dispute halted around 400,000 barrels a day of oil exports from the Ceyhan port in Turkey, tightening the market.
- Sentiment also got a boost from positive news flow surrounding the banking sector, raising hopes that the worst of the recent banking turmoil may be over.
- Expectations that the Federal Reserve would end its tightening campaign soon and optimism around China’s demand recovery supported prices as well.
- JPMorgan Chase & Co. is forecasting Brent to break below $60 per barrel in the near term, as reported by Bloomberg. Bloomberg energy
- Gold prices were slightly down to $1955 /oz, after falling 1% the day before, and remaining below a one-year high of above $2,000 touched last week.
- Yesterday, the Federal Deposit Insurance Corporation said First Citizens BancShares Inc would acquire Silicon Valley Bank’s deposits and loans.
- However, the price of gold is up 7% this month, buoyed by safe-haven demand as the recent banking turmoil in the US and Europe raised fears of an economic recession. Kitco metals