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Morning NOTE

29 June 2023


The ZAR weakened on the back of a resurgent Dollar after Jerome Powell and other Central Bankers called for higher global rates.


The Rand remained on the backfoot following consensus from G7 central bankers that inflation remains too high .

  • At the Central bankers gathering Europe all agreed to “Hike Rates Further”.
  • Majority of policymakers expect two or more rate hikes by the end of the year as the process of getting inflation back down to 2% has a long way to go.
  • Fed Chair Powell reiterated at a Banco de Espana Conference, reinforcing messages from previous days.
  • Yesterday, BoE Governor Bailey and ECB President Lagarde both said they expect further tightening measures to cool down inflation.
  • All of this likely to affect the risk complex and drive risk assets lower.
  • We expect the Rand to underperform in this environment.
  • Today we have SA inflation at 11h30 and US GDP later in the afternoon.

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 after global central banks committed to raising rates to fight inflation.
  • Rising yields continue to affect high yielding currencies and the ZAR on the defensive.
  • At the European central bankers conference
    • Jerome Powell joining Lagarde from the ECB and Bailey from the BOE, stating that inflation has a long way to go to get back to 2%.
    • The world’s largest central banks, all committed to bringing inflation down.
  • The ZAR once again losing more than 20 cents at the opening salvo on the back of stronger Dollar.
    • The unit reaching 18.7500 vs 18.4100 on Tuesday.
  • Today we await SA PPI inflation at 11h30 with 6.8% expected and the all important US PCE tomorrow.
    • Yields remain the drivers and we expect the Dollar rally to continue on the back of rising interest rates.
  • Trade : BUY USDZAR on dips (i.e.SELL ZAR)

Markets this morning

  • USDZAR 18.700
  • DOLLAR 103.060
  • EURUSD 1.0906
  • SP500 4,379
  • GOLD 1903
  • US10YT 3.75%

Expected Ranges:

  • USDZAR : Expect a range 18.5200-18.8500
    • Importers : 18.6300-18.5200
    • Exporters : 18.7400-18.8500
  • EURZAR :  Expect a range of 20.2500-20.4900
    • Importers : 20.3300-20.2500
    • Exporters : 20.4100-21.4900
  • GBPZA  : Expect a range of 23.4600-23.7600
    • Importers : 23.5600-23.4600
    • Exporters : 23.6600-23.7600


  • USDZAR 18.7000
  • EURZAR 20.3800
  • GBPZAR 23.6200



  • The SA  Presidency says the debacle involving presidential security officers and their weapons in Poland almost two weeks ago has not been a blight on bilateral relations.
    • One hundred security personnel and a dozen journalists were barred from disembarking a chartered SAA plane in Warsaw for 26 hours over a dispute regarding weapon permits.
    • They were en route to accompany President Cyril Ramaphosa on his peace mission to Ukraine and Russia.
    • The Presidency was assured by the South African Police Service that all its documents for the security equipment on board that flight were in order.
    • The  government is engaging its Polish counterparts to understand why members of the presidential protection unit and journalists were held aboard an aircraft and barred from entering Poland for more than a day. Source EWN


  • BMW South Africa is going electric – and will be investing R4.2 billion over five years to prepare its manufacturing plant in Rosslyn in Pretoria for the electro mobility era.
  • Dr Milan Nedeljkovíc, member of the board of management of BMW AG for production and chair of the board of management for BMW Group South Africa,
    • said on Wednesday the next generation BMW X3 will be produced at Plant Rosslyn from the second half of 2024 and “will come as a plug-in hybrid”. Source Moneyweb



  • US stock futures lower on Thursday after the major averages ended mixed during Wednesday’s regular session.
    • Traders however betting to finish the month with solid gains.
    • Futures contracts tied to the three major indexes were all up at least 0.2%.
    • In regular trading on Wednesday, the Dow fell 0.22% and the S&P 500 shed 0.04%, while the tech-heavy Nasdaq Composite gained 0.27%.
    • Growth stocks mostly advanced, though semiconductor names came under pressure amid reports that the US government was considering banning AI chip exports to China.
    • Those moves came as Fed Chair Jerome Powell said at the ECB Forum that he does not see inflation reaching the 2% target any time soon, suggesting more rate hikes are on the table.

Government bond Yields continue to rise following consensus by global central bankers to continue the hiking cycle.
In the USA

  • The yield on the US 10-year Treasury note hovered around 3.7% in the last week of June.
    • Traders continue to weigh fresh economic data pointing to a resilient economy and prospects that interest rates will continue to march higher.
    • Fed Chair Powell reiterated at the ECB Forum on Central Banking that interest rates will rise further and that he wouldn’t take moving in consecutive meetings off the table at all.
    • Allowing for the continued rates hikes, were note when Powell stated that a recession in the US is not the most likely case.
    • Market participants are currently assigning a nearly 84% chance the Fed will deliver a 25bps increase in the fed funds rate in July.
    • The focus now shifts to fresh PCE inflation due Friday.


  • DOW -74 to 33,852
  • SP500 -1.55 to 4,376
  • NASDAQ +36 to 13,591

image: Trading economics


Asian markets
Eastern markets mixed with increased level of uncertainty following the Fed’s commitment to hike rates.

  • In Japan, the Nikkei 225 rose 0.12% to close at 33,234.
    • Japanese shares struggling for direction as hawkish remarks from major central banks including the FED, ECB, BOE weighed on investor sentiment.
    • Still, the benchmark indexes remained close to their highest levels since 1990 as a weak yen and market enthusiasm over artificial intelligence-related technologies underpinned domestic equities.
    • Technology stocks mostly advanced
  • In Australia, the ASX 200 Index inched down 0.02% to close at 7,195 on Thursday, snapping a two-day advance as hawkish remarks from major central banks including the FED, ECB, BOE  weighed on investor sentiment.
    • Mining stocks led the decline, with notable losses from BHP Group (-0.7%), Rio Tinto (-1.1%) but  technology stocks tracked their US peers higher.  Reuters

Oil prices lower following hawkish comments from major central banks.  

  • US WTI crude futures fell to around $69/bl on Thursday.
    • Prices lower on the back of  the prospect of further monetary tightening that could hamper global growth and future energy demand.
    • The FED, ECB and BOE all indicated willingness to raise interest rates further this year to bring down inflation.
    • Heightened economic uncertainties in China and the lack of aggressive pro-growth policy measures from Beijing also clouded the demand outlook for the world’s top crude importer.
    • Meanwhile, official data showed that US crude inventories declined by 9.6 million barrels last week, way higher than forecasts of a 1.757 million barrel draw.
    • Investors also fretted about Saudi Arabia’s voluntary supply cuts in July which come on top of existing production cuts already agreed by OPEC+ member countries. Source : Gulfnews

Gold under pressure on the back of rising US rates and a resurgent Dollar.  

  • Gold held below $1,910/oz on Thursday, hovering at its weakest levels in over three months as US Federal Reserve Chair Jerome Powell said it will take time to bring inflation back down to the 2% target.
    • The head of the world’s largest central bank also  noting that two more rate rises are likely this year.
    • Markets are now betting that the Fed would deliver another 25 basis point rate hike in July.
    • According to Kitco news, the inflation problem is not going away, with the FED and ECB  doubling down on their calls to keep raising rates amid promises of price stability.
    • The Gold market is not taking it well, with prices at risk of falling below $1,900/oz in the short term.
    • The latest macro data out of the U.S. supports more tightening by the Fed. Source : Kitco

The Dollar remained on the front foot after Powell reaffirmed the FOMC stance for higher rates to fight inflation.  

  • The US dollar rose to around 103 on Thursday.
    • The Greenback inching closer to its strongest levels in two weeks after Jerome Powell reaffirmed the central bank’s firm hawkish stance at the ECB Forum.
    • Powell said he does not see inflation reaching the 2% target any time soon, noting that two more rate rises are likely this year.
    • He added that he wouldn’t take consecutive-meeting rate hikes off the table, including a possible rate increase in July.
    • Those comments came on the heels of strong US economic data, with consumer confidence hitting a nearly 1-1/2-year high in June, while business spending, durable goods orders and home sales held up in May.
    • Meanwhile, the ECB also indicated  further policy tightening this year to combat inflation, while the BOJ remained committed to ultra-easy monetary policy. Source : Trading economics

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