View this email in your browser

Morning NOTE

28 September 2022


The ZAR weakened in New York trading after staging  a bit of recovery  in early European trading following improved risk sentiment in Asian .


  • The Rand retraced all its hard earned gains, following a Risk off session in New York.
    • The local unit reaching 17.8500 in early European trading before reversing sharply after bond yields spiked in New York.
    • The Rand opening today at 18.1100, following a rebound in the Dollar.
    • The Dollar index rose above 114.50 setting a 20 year high, after Fed officials remained hawkish and flat out rejected a possible currency agreement similar to the Plaza accord of 1985.
  • What was the Plaza accord ?

    • The Plaza Accord was a 1985 agreement among the G-5 nations—France, Germany, the United States, the United Kingdom, and Japan.
      • The idea was to manipulate exchange rates by depreciating the U.S. dollar relative to the Japanese yen and the German Deutsche mark.
    • White House National Economic Council Director Brian Deese rejected the idea of another 1985-type currency accord to weaken the dollar when asked at an Economic Club of Washington, DC
      • He said, the US economy’s relative strength was a major factor in driving the dollar higher, amid a backdrop of a highly uncertain global environment.
      • The news sent the buck higher as it recovered early sessions losses and setting 20year highs on the DXY.
  • The US 10YT at 4.01%  and the UK 10Y at 4.56% supporting RISK OFF SENTIMENT !
  • Locally we continue to wait for 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


·         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 opened sharply weaker on the back of a rampant Dollar.
    • The US currency reaching 20 years highs vs the major basket of currencies on the DXY.
    • The local unit likely to remain under pressure.
    • Bond yields spiking across the board, following the move by the UK to cut taxes that market treated as fuelling inflation further.
    • Risk assets as well as EMFX all falling on the side as the Buck powers ahead.
  • Today, we await Fed speakers, but this likely to err on the side of caution i.e. Hawkishness.
    • We expect a continuation of the trend and thus A WEAKER ZAR.
  • Trade :  BUY USDZAR

Expected Ranges

  • USDZAR :  Expect a range 17.8500-18.3200
    • Importers 17.9800-17.8500
    • Exporters 18.1600-18.3200
  • EURZAR :  Expect a range of 17.1300-17.4600
    • Importers 17.2400-17.1300
    • Exporters 17.3500-17.4600
  • GBPZAR :  Expect a range of 19.1000-19.5500
    • Importers 19.2500-19.1000
    • Exporters  19.4000-19.5500


  • USDZAR 18.1100
  • EURZAR 17.3200
  • GBPZAR 19.3400


  • Jaggersfontein 2.0
    • Another dam wall burst on at the stricken mine in the Free State.
      • The office of Premier Sisi Ntombela said that water was running through the area of Charlesville and the nearby Dennis Louw farm.
      • Kopanong Municipality Mayor Xolani Tsele-Tsele said that this could be the result of heavy downpours.
      • The premier’s spokesperson Palesa Chubisi said that police and emergency services have been deployed to the affected area.
    • Most opposition parties rallied together on Tuesday, to support the Democratic Alliance (DA)’s call for an investigation of the role of state agencies in the matter.
      • In opposition, the ANC rejected the notion.
        • Most opposition parties rallied to support the DA’s call for an investigation. NEWS24
        • The majority party stating, the establishment of a committee to probe the theft of foreign currency from President Cyril Ramaphosa’s Limpopo farm would create a constitutional crisis.
  • Public Enterprises Minister Pravin Gordhan announced that the Eskom board would be replaced.
    • Gordhan met members of the board, whose terms expired last year, and whose positions were extended subject to a review.
    • He informed the board, a review had been finalised and members would be informed of the outcome of the process.
    • The restructuring of the Eskom board came as political parties in Parliament called for the board and the CEO’s removal following the latest bout of load shedding. EWN


  • In regular trading on Tuesday, the Dow and S&P 500 reversed large early gains to fall 0.43% and 0.21%, respectively, while the Nasdaq Composite finished 0.25% higher.
    • All three benchmarks are now in bear market territory, with the S&P 500 taking out its previous low in June.
  • Those moves came as investors are worried that a Fed-induced recession could seep into corporate earnings results.
  • Heightened volatility in the bond and currency markets also kept investors on edge
    • US stock futures fell on Wednesday after the major averages ended mixed in the last regular session.
    • Traders citing, as worries over a potential earnings slowdown added to concerns about the Federal Reserve’s aggressive plan to quell surging inflation.
    • Futures contracts tied to the three major indexes all traded in negative territory.


  • US 10year yield breached 4% in early European trading following more comments from FED officials that they will stay the course to bring inflation down to 2%.
    • This implied a certainty of 75bps at the next meeting.
  • In the UK, the  yield on the 10-year Gilt broke above 4.3% for the first time since November 2008.
    • The spike continued after BoE’s Huw Pill suggested the central bank may hike rates significantly at the next policy meeting in response to finance minister Kwasi Kwarteng’s huge tax cuts.
    • He added the central bank should wait until the scheduled November meeting to act, in line with the BoE statement on Monday.
    • Meanwhile, Kwasi Kwarteng showed optimism in its economic strategy, saying he remains committed to bringing debt under control and reiterated that his £45 bn of tax cuts would boost growth.
    • Money markets now price in about 160 bps of hikes at the BoE’s November meeting and expect the key rate to surpass 6%.
    • This after the BoE said it will not hesitate to change interest rates as necessary to return inflation to the 2% target.


  • The Dow fell 125 to 29,134
  • The SP500 fell 7.75 to 3,647
  • The Nasdaq gained 26 to 10,829


  • Asian markets sharply lower following a sharp drop on Wall Street. This after a spike in Bond yields and a US rejection of some form of currency manipulation.
    • In Japan, the Nikkei 225 fell as much as 0.56% to 26,423, hitting their lowest levels in over two months and taking cues from a negative lead on Wall Street.
      • This amid concerns that a potential recession would hit corporate earnings next year.
      • Foreign investors also remained cautious over Japanese shares from a falling yen in the global markets.
      • Moreover, BOJ policy members see consumer prices slowing in fiscal 2023 unless commodity prices continue to rise.
        • This according to the minutes of the central bank’s July meeting.
    • In Australia, the ASX 200 declined 0.53% to 6462, on Wednesday, following a weak session on Wall Street.
      • Investors are also looking ahead to retail sales data in Australia that could give fresh insight on the state of the economy and influence the direction of domestic monetary policy. Reuters
  • The US dollar spike to 20 year highs and rose above 114.5.Continued hawkish remarks from Federal Reserve officials supporting the Buck.
    • In addition, the rejection of a possible currency agreement among major economies supported the Dollar further.
    • A chorus of Fed policymakers indicated the central bank’s determination to do what is necessary to bring down inflation, even at the risk of a recession and further market volatility.
    • Meanwhile, the White House rejected the idea of another 1985-type currency accord to weaken the dollar when asked at an Economic Club of Washington, DC event. FX news
  • Crude oil prices sharply lower as rising bond yields a stronger dollar all point to a global recession.
    • In New York, WTI crude futures fell toward $77/bl, and sliding back to the lowest levels since early January.
    • Traders citing a rallying dollar and higher US crude inventories outweighed concerns that OPEC+ may reduce output further.
      • The dollar index surged to a fresh 20-year high after a White House official ruled out a currency agreement among major economies to weaken the greenback.
        • Inventory data also showed the US crude stockpiles expanded by more than 4 million barrels last week, ahead of official data later on Wednesday.
        • Oil prices faced heavy selling pressure since June and are on track to post their first quarterly decline in more than two years.
      • Meanwhile, sharp falls in oil prices stoked speculations that OPEC+ may cut output to stem the slide,
        • with Moscow reportedly lobbying the group to slash production by about 1 million barrels a day.  Gulf Energy News
  • Gold prices fell toward $1,620 /oz on  Wednesday, heading back to the lowest levels in 2-½-years, weighed down by a resurgent dollar and hawkish remarks from several US Federal Reserve officials.
    • The dollar scaled fresh 20-year highs against a basket of its major peers on Wednesday after a White House official ruled out a currency agreement among major economies to weaken the greenback.
    • Bullion remains in a bear trend and unlikely to change direction until after the FED changes its monetary policy path . Kitco metals

Copyright ©
2022 RussellStone Treasury 
All rights reserved.

Our mailing address is:

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.