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Morning NOTE

 29 March 2023


The ZAR range traded to stronger levels, following a risk rally in yesterday’s European and US sessions.


The Rand gained 1.2 % to trade as strong as 18.1000, on the back of improved sentiment following the recent banking crises.

  • Fed official, vice chair Michael Barr testifying in the US Senate and reiterating that their models indicate the banking system remains sound.
    • He added that Silicon Valley Bank failed due to poor risk management and that is likely to be an isolated event.
  • Markets rebounded, but then reversed as Treasury yields rose later in the session.
    • The US 10YT trading above 3.60%, refocusing on the inflation problem and that the Fed would likely hike again at the next meeting.
    • Money markets currently pricing 25 bps.
  • The Dollar retreating in favour of risk assets as investors once again opted to buy Risk assets like the SP500 and higher yielding FX, like the ZAR.
    • However, this could be short lived if treasury yields resume their rise i.e. PRE-SVB, when markets were close to 4% on the 10YT.
    • If we continue to see a spike in yields, the dollar likely to regain its stronghold and we could see another up leg in the buck.

This would of course be ZAR negative.

  • It appears that in current environment that the ZAR is caught in a perfect storm, and R18.000/$ might be good levels for importers in H1 of 2023.
    • However, with yields likely to decline in H2 , this picture likely to reverse and we then anticipate ZAR gains .

Data this week


  • 11H30 : SA PPI  YOY 13.1% EXPECTED VS 12.7% PREVIOUS


  • 14H30 : USA  PCE 5.1% EXEPCTED VS  5.4% PREVIOUS

Market Movement Today:

  • The ZAR retreating in early trading, following a strong session on Tuesday.
    • The local unit opening at 18.17000 after reaching 18.1000 on Tuesday.
  • The Dollar rebounding following an overnight rise in US treasury yields.
    • The FED vice chair /Michael Barr testifying to the US Senate that SVB was an isolated event.
      • As it was the result of poor bank risk management and not anything systemic.
  • Markets then re-focussed on the inflation conundrum , that focused on elevated price pressures as well as a tight labour market.
    • The US 10YT yield rising to 3.6% and likely to provide support for the Dollar at the expense of other currencies.
  • In Europe the ECB’s President Lagarde said that the central bank is determined to get the inflation back on target and it won’t involve “trade-offs”.
    • In addition, board member Isabel Schnabel said the ECB could look for new ways of managing liquidity in the banking sector.
      • She even alluded to steering short-term interest rates in the market.
  • Rising G7 yields would likely be a concern for the ZAR, which confirms our H1 thesis of weaker ZAR
    • And a reversal in H2 of 2023.
  • For now the ZAR firmly range trading between 18.0000 to 18.5000, and this likely to be the case as long as
    • Uncertainty remains around yields and the banking sector.
  • NB:  leading into tomorrow,  we also anticipate some ZAR weakness ahead of the SARB MPC (+25BPS EXPECTED) ,
  • As Foreign  bond portfolio managers usually engage in USD BUYING  ahead of major SA policy decisions.
  • Trade :  We expect the ZAR to remain supported inside this range, with Bids for Dollars as we approach
    • 18.1000-18.0000 and offers as we approach  18.30000 to 18.5000
      • Buy  18.0000
      • Sell 18.3000

Expected Ranges:

  • USDZAR :  Expect a range 18.0100-18.2800
    • Importers 18.1000-18.0100
    • Exporters 18.1900-18.2800
  • EURZAR :  Expect a range of 19.5400-19.8100
    • Importers 19.6300-19.5400
    • Exporters 19.7200-19.8100
  • GBPZAR  :  Expect a range of 22.2600-20.5000
    • Importers 22.3400-22.2600
    • Exporters : 22.4200-22.5000


  • USDZAR 18.1700
  • EURZAR 19.6900
  • GBPZAR 22.3900


Water crises ?

  • For some Joburg residents – no water and no electricity.
    • This as Rand Water appeals for patience while waiting for reservoirs to fill up after taps ran dry for close to three weeks in several areas across the metro.
    • The bulk water supplier said that water had been restored to households and businesses in Brixton, Hursthill and Crosby.
    • However, many residents still can’t flush their toilets, take a shower or wash their dishes.
    • Adding to the service delivery headache, they also have to navigate through load shedding rosters.


  • The SOE announced Stage three load shedding has been implemented .
    • Citing breakdowns at power stations had increased, causing a loss of more than 15,000 megawatts of generating capacity.
    • Acting spokesperson, Daphne Mokwena, said that three generation units were returned to service over the weekend. IOL

The Capital

  • Democratic Alliance (DA) councillor Cilliers Brink has been elected as the new executive mayor for the City of Tshwane.
    • Brink was up against newly sworn-in Congress of the People (Cope) councillor, Ofentse Moalusi.
    • A total of 109 councillors voted for Brink while 102 councillors voted for Moalusi and there were no spoiled votes.
    • Brink has promised to work with all parties in order to stabilise the capital city. EWN


  • On Tuesday, the Dow fell 0.12%, the S&P 500 lost 0.16% and the Nasdaq dropped 0.45%, with six out of 11 S&P sectors finishing lower.
    • US stock futures rose on Wednesday after the major averages finished lower during Tuesday’s regular session.
    • Tech / Growth stocks came under renewed pressure from rising Treasury yields.
  • Futures contracts tied to the three major indexes were all up at least 0.1%.
    • Treasury yields rose for the second straight session on Tuesday, with the benchmark 10-year yield climbing toward 3.6%.
    • Traders also continued to monitor developments surrounding the recent banking turmoil,
      • with the Fed’s Michael Barr set to make another appearance in Washington on Wednesday. CNBC


  • The US 10-year yield, seen as a proxy for global borrowing costs, consolidated above 3.5%.
    • Investors paused to reassess the outlook for monetary policy while weighing the risk of a recession after the recent turmoil in the banking sector.
      • This week a report on the Fed’s preferred measure of inflation will be published to provide further clues into the central bank’s next move.
    • So far, inflation data and a tight jobs market ,  sparked speculation that the Fed’s rate-tightening cycle was not over.
      • Money market bets are now equally split between the 25 basis point rate hike and a pause during the regulator’s policy meeting in May.
    • Also , traders continue to discuss recent comments from  Minneapolis Fed President Neel Kashkari,
      • who  warned that recent stress in the financial sector,
      • could lead to  the possibility of a follow-on credit crunch brings the world’s largest economy closer to recession. Reuters


  • The Dow declined 37 to 32,984
  • The SP500 declined 6 to 3,971
  • The Nasdaq  fell 52 to 11,716

  image: Trading economics


The US dollar

  • The US dollar remained under pressure even though US yields rebounded.
    • The  index held its recent decline to around 102.5 after losing nearly 1% in the past two sessions.
    • Fears over the recent financial turmoil continued to ease, prompting traders to reduce holdings in safer assets.
  • Federal Reserve vice chair for supervision Michael Barr also told lawmakers that SVB’s troubles were due to “terrible” risk management, suggesting it could be an isolated case.
    • On the monetary policy front, the Fed delivered a widely expected 25 basis point rate hike last week and hinted at just one more rate increase.
    • Still, Fed Chair Jerome Powell said the officials didn’t see rate cuts for 2023 and were prepared to prolong their tightening cycle if needed.
    • All eyes now turn to a key measure of US inflation(PCE) and several speeches from Fed officials this week.

Asian markets mixed following a weaker session on Wall street.

A rebound in treasury yields also creating concerns sparking fears the Fed might continue to tighten policy even though banks remain under pressure.

  • In Japan, the Nikkei 225, rose for the third straight session, with nearly all sectors participating in the advance.
    • Investors shrugged off a negative lead on Wall Street overnight, as growth stocks in the US came under renewed pressure from rising Treasury yields.
      • Commodity-linked stocks led the market higher, with notable gains from Nippon Steel (0.8%) , Toyota Motor (0.6%) .
      • Elsewhere, SoftBank Group jumped 5.5% amid a boost from its holdings on Alibaba which surged in the US after the Chinese tech giant announced it will split into six business groups
  • In Australia, the ASX 200 fell 0.2% to around 7,020 on Wednesday, after taking cues from a negative lead on Wall Street.
    • Investors nervous about rising Treasury yields and heightened economic uncertainties.
    • Technology stocks led the decline
    • Investors now await Australia’s monthly CPI indicator for clues on the trajectory of domestic interest rates. Reuters

Crude oil

  • US WTI crude futures climbed toward $74 /bl, rising for the third straight session.
    • Traders citing , API data that showed that US crude inventories unexpectedly declined by 6.1 million barrels last week, defying expectations for a 180,000 barrel rise.
    • Moreover, OPEC’s de-facto leader Saudi Arabia said the oil cartel should keep supplies steady for 2023 as it navigates a fragile recovery in global oil demand.
  • Meanwhile, Russian Deputy Prime Minister Alexander Novak said the country should increase exports to “friendly” countries,
    • noting that supplies to India jumped to levels not seen in over two decades.  Gulf Energy News


  • Gold steadied near $1,970/oz  on Wednesday, pausing a recent rally as fears of a wider banking contagion abated, hurting demand for safer assets.
    • The market cheered news that First Citizens BankShares agreed to buy all deposits and loans of failed Silicon Valley Bank.
  • Federal Reserve vice chair for supervision Michael Barr also told lawmakers that SVB’s troubles were due to “terrible” risk management,
    • suggesting it could be an isolated case.
  • Meanwhile, market still expected the Federal Reserve to raise interest rates by another 25 basis points in May,
    • as the central bank balances the ongoing battle against inflation with efforts to prevent the banking crisis from spreading further.

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