The ZAR strengthened last week on the back of an unexpected SARB rate hike as well as weaker than expected US PCE data.
The Rand traded to a strongest level of 17.7000 last week before the USD finding support and retracing to 17.9100.
- Markets under pressure in early Monday trading, after OPEC+ surprised with an unexpected 1 million barrels per day production cut.
- Oil prices surging as much as 8% with Brent Crude at $84/bl and US WTI at $79.50/bl.
- Analysts adding that this complicates the outlook for inflation and interest rates, as investors had been betting that easing price pressures would give central banks room to pause the current tightening cycle.
- The Dollar also rallying to 103, after trading lower following last week’s US PCE report that surprised lower.
- On the back of the OPEC+ news, reigniting fears that the Federal Reserve may need to keep raising interest rates to keep inflation under control.
- This likely to keep the dollar bid in the early parts of this week.
- In addition we have the key US Jobs report on Friday.
Data this week
- 11h00 : SA ABSA MANUFACTURING PMI 52.8 EXPECTED VS 48.8 PREVIOUS
- 16H00 : US ISM MANUFACTURING PMI 47.5 EXPECTED VS 47.7 PREVIOUS
- 11H00 : EUROZONE PPI 13.5% EXPECTED VS 15% PREVIOUS YOY
- 16H00 : US JOB OPENINGS 10.4MIO EXPECTED VS 10.82MO PREVIOUS
- 14H15 : ADP PRIVATE PAYROLLS 205K EXPECTED VS 242K PREVIOUS
- 16H00 : US ISM NON- MANUFACTURING (SERVICES) PMI 47.5 EXPECTED VS 47.7 PREVIOUS
- 14H30 : US WEEKLY JOBLESS CLAIMS 200K VS 198K PREVIOUS
- 14H30 US NON FARM PAYROLLS 238K VS 311K PREVIOUS
- 14H30 US UNEMPLOYMENT RATE 3.6% EXPECTED VS 3.6% PREVIOUS
Market Movement Today:
- The Rand continued its recent run on the back of the SARB and weaker than expected US PCE data.
- The local unit reaching 17.7000 before reversing.
- This morning’s news about OPEC’s surprise production cuts sending oil prices higher as well as bond yields.
- Inflation immediately a topic as traders worry about the Fed’s next steps.
- If oil remains higher, the direct correlation indicates the potential for higher inflation and likely more FED hikes.
- The banking crises a distant memory as monetary policy once again dominate trader sentiment.
- Adding to volatility for the week is the surprise release of the NON FARMS PAYROLLS REPORT on GOOD FRIDAY this week.
- In what would be very thin liquidity conditions, to have such a high risk data release could only lead to wide ranges.
- It is important for short term importers and exporters to cover at least 50% to 100% before the data release.
- The surprises in the numbers have seen the ZAR decline or strengthen nearly 50cents on numerous occasions.
- Trade : the oil spike likely to provide dollar support and we expect a weaker ZAR on Monday.
- Dollar short likely covering and booking profits.
- Buy 17.7000
- Sell 18.0000
- USDZAR : Expect a range 17.5100-18.1400
- Importers 17.7200-17.5100
- Exporters 17.9300-18.1400
- EURZAR : Expect a range of 18.9000-19.6200
- Importers 19.1400-18.9000
- Exporters 19.3800-19.6200
- GBPZAR : Expect a range of 21.4500-22.3500
- Importers 21.7500-21.4500
- Exporters : 22.0500-22.3500
- USDZAR 17.9100
- EURZAR 19.3600
- GBPZAR 22.0000
- Former Johannesburg mayor, Mpho Phalatse, has rubbished claims that she’s about to leave the Democratic Alliance (DA).
- She lost out to John Steenhuisen, who was re-elected as DA leader at the party’s congress in Johannesburg over the weekend.
- Phalatse said that she was considering her next move in the DA and would not be heading to ActionSA as speculated. EWN
- Urgent action is needed to fix SA’s crumbling rail network
- It’s time to stop talking about policy and get the private sector involved, says Africa Rail Industry Association.
- South Africa’s 21 000km rail network used to be a matter of national pride, accounting for some 80% of Africa’s total network.
- This massively over-specked network needs to be pruned to no more than 5 500km and operated with the kind of financing and efficiency that the private sector.
- according to the Africa Rail Industry Association (Aria). Moneyweb
- ESKOM : South Africans are bracing for another hard winter with more load shedding on the way.
- This after more delays Koeberg 1 and its return to active electricity generation.
- Unit 1 of the Koeberg nuclear power station was supposed to return to service 45 days after the latest deadline of 23 July.
- The new target date of 13 September is a full 90 days after the original date of 8 June, when the 180-day outage was supposed to end.
- This means the project team is overshooting its deadline by 50% and extending it to 270 days. Moneyweb
- US stock futures fell on Monday ahead of the first trading day of the second quarter, as investors continued to assess the outlook for inflation, growth and interest rates.
- Nasdaq 100 and S&P 500 futures dropped 0.4% and 0.2%, respectively, while Dow futures were flat.
- Meanwhile, Wall Street came off a winning quarter, with the Nasdaq Composite surging 16.8% in the three months to March, while the S&P 500 and Dow climbed 7% and 0.4%, respectively.
- Investors navigated volatility markets during the period marked by turmoil in the banking sector highlighted by the collapse of Silicon Valley Bank in March.
- Still, technology stocks performed well and served as a safe haven bet for traders despite heightened economic uncertainties.
- Investors now look ahead to a number of US economic releases this week such as jobs openings data on Tuesday,
- ADP private payrolls report on Wednesday and the monthly jobs report on Friday.
- The US 10 Year Bond Yield was 3.52% on Monday April 3, according to over-the-counter interbank yield quotes for this government bond maturity.
- Yields finding support after OPEC’s surprise production cut and also once again bringing inflationary fears to the front of the discussion.
In the UK
- The yield on the UK’s 10-year rose above 3.5%, hitting its highest level since March 10th.
- This after trader expects another interest rate hike by the Bank of England looks more likely in May.
- Governor Andrew Bailey stressed on Monday that interest rates may have to move higher if there were signs of persistent inflationary pressure after UK inflation unexpectedly rose to 10.4% in February.
- The Dow gained 415 to 33,275
- The SP500 unchanged 4,109
- The Nasdaq added 208 to 12,221
image: Trading economics
The US Dollar
- The dollar climbed to around 103 on Monday, rising for the second straight session after OPEC+ surprised markets by announcing further production cuts.
- The cuts reigniting fears that the Federal Reserve may need to keep raising interest rates to keep inflation under control.
- Meanwhile, data released on Friday showed that US core PCE price growth, the Fed’s preferred gauge to measure inflation, slowed more than expected to 4.6% in February, the lowest in 15 months.
- US consumer spending also rose moderately in February after surfing in the previous month.
- Markets are now pricing an over 50% chance that the central bank will deliver a quarter-point rate hike in May, while expecting rate cuts by the end of the year. Fx news
Asian markets mixed and undecided following the OPEC CUTS.
- In Japan, the Nikkei 225 climbed 0.52% to close at 28,188, rising for the second straight session to the highest levels in three weeks, helped by gains in energy, financial and consumer stocks.
- Oil prices surged as much as 8% after OPEC+ announced a surprise production cut of more than 1 million barrels a day.
- Meanwhile, investors reacted to data showing Japan’s business sentiment tumbled to an over 2-year low in the first quarter as the banking crisis in the US and Europe added to uncertainty over already slowing global growth. Reuters
- US WTI crude futures surged about 7% to above $80/bl.
- Prices hitting its strongest levels in over two months after OPEC+ announced a surprise production cut of more than 1 million barrels a day.
- This complicates the outlook for inflation and interest rates, as investors had been betting that easing price pressures would give central banks room to pause the current tightening cycle.
- A dispute involving exports of around 400,000 barrels a day from Turkey also tightened the market since last week, and seemed unlikely to be resolved anytime soon.
- On the demand side, investors remain optimistic about China’s recovery, further supporting prices. Gulf energy news
- Gold weakened past $1,960/oz on Monday, extending losses from the previous session after OPEC+ surprised markets by announcing further production cuts.
- the spike in bonds yields on the back of inflationary fears, sending Gold prices lower.
- The group of major oil producers announced additional output cuts of around 1.16 million barrels per day.
- Investors now look ahead to a number of US economic releases this week such as jobs openings data on Tuesday;
- ADP private payrolls report on Wednesday and the monthly jobs report on Friday. Kitco metals