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GOOD MORNING
The ZAR continued to consolidate near stronger levels after a rebound in Risk assets.
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SUMMARY
The Rand managed to trade near R18/$ after US equities rebounded strongly in New York.
- Atlanta’s Fed president Bostic causing the rally with his comments, that rate cold pause in the summer.
Traders continue to digest incoming data with Eskom’s power cuts continuing to be a drag on manufacturing activity.
- US stock futures eased on Friday as investors continued to assess the outlook for Federal Reserve policy in light of recent commentary from central bank officials.
- In a complete turnaround, Bostic commented that the Fed could be in a position to pause rates in the summer.
- However, Fed Governor Christopher Waller maintained a hawkish view, saying rates could peak higher if labour and inflation numbers don’t cool as expected.
- US stocks also erased losses from earlier in the session when robust jobs data pointed to a still-tight labour market and opened the door for further rate increases.
- US weekly claims also declined, giving further evidence that the US labour market remains tight in part to reduced labour force participation.
- This could force employers to raise wages to attract and keep staff, adding to further inflationary pressure in the world’s largest economy.
- Adding weight to the Fed narrative that rates can afford to rise more to combat inflation.
- The US 10YT at 4.03% with the DXY creeping higher to 104.72
- Adding to inflationary pressures are, Eurozone inflation.
- CPI in the Euro Area moved lower to 8.5 % but above market expectations of 8.2 percent, a preliminary estimate showed.
- The latest data added to signs that inflationary pressure remained high in Europe and bolstered expectations that the European Central Bank will remain hawkish for longer.
- Today, we await for the KEY US ISM report. The report will examine price pressures in the services sector i.e. NON-MANUFACTURING.
- It’s become important because numerous FED governors have mentioned it in recent speeches.
Data this week
FRIDAY
- 17H00 : US NON MANUFACTURING (SERVICES) PMI 54.5 EXPECTED VS 55.2
Market Movement Today:
- After another volatile week, the Rand rebounded and traded closer to the R18/$.
- US equities rebounded strongly in New York after Atlanta Fed chair, Raphael Bostic said rates could pause in the summer.
- Traders also keeping a watchful eye on incoming data with Eskom’s power cuts continuing to be a drag on manufacturing activity.
- However the threat of RISK OFF, continues to linger, especially as markets wait for this afternoon’s US ISM ( SERVICES) data.
- A surprise to the topside likely to drive assets lower and cause more weakness in the ZAR.
- In early European trading the SP500 already reversing overnight gains, and this likely to limit ZAR gains below R18/$,
NB: Short term importers, +/- 2 weeks are advised to cover at least 50% of the risk ahead of the data release.
- Trade : levels near R18/$, present opportunities for short term importers to exact cover and exporters to utilise both FX options and FEC’s .
SHORT TERM IMPORTERS ARE ENCOURAGED TO LOOK AT DERIVATIVES TO IMPROVE RATES FOR NEAR TERM INVOICING.
Expected Ranges:
- USDZAR : Expect a range 18.0500-18.2900
- Importers 18.1300-18.0500
- Exporters 18.2100-18.2900
- EURZAR : Expect a range of 19.1800-19.51000
- Importers 19.2900-19.1800
- Exporters 19.3100-19.3700
- GBPZAR : Expect a range of 21.6200-21.8600
- Importers 21.7000-21.6200
- Exporters 21.7800-21.6200
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OPENING RATES
- USDZAR 18.2000
- EURZAR 19.3700
- GBPZAR 21.8200
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SOUTH AFRICA
Eskom under siege
- Bulletproof vests and bodyguards –
- The death threats have filtered down to power station level, as saboteurs and crime gangs run amok.
- In addition it has emerged that, Former Eskom chief executive André de Ruyter personally briefed the highest-ranking police official in the country.
- He briefed national police commissioner General Fannie Masemola – on allegations of corruption at Eskom allegedly extending to two senior ANC government officials.
- South Africa’s 10-year government bond yield traded around 10.12%, down from a nearly two-month high of 10.26% hit on February 21st.
- The primary risks to the fiscal outlook include a worsening economic outlook, a further weakening of the state-owned companies finances, and an unaffordable public-service wage agreement.
- Earlier in February, investors welcomed the government’s plans for indebted Eskom during the budget speech dominated by the power crisis.
- Finance Minister Enoch Godongwana said the government would take on 254 billion rands of Eskom’s 423-billion-rand debt over the next three years.
- Godongwana also claimed the government was reducing the fiscal deficit without resorting to tax increases or further cuts in social wages and infrastructure.
GLOBAL MARKETS
Stocks:
- US stock futures eased on Friday as investors continued to assess the outlook for Federal Reserve policy in light of recent commentary from central bank officials.
- Futures contracts tied to the three major indexes were all down at least 0.1%.
- On Thursday, the Dow (1.05%), S&P 500 (0.76%) and Nasdaq Composite (0.73%) all finished higher.
- Traders citing comments from Atlanta Fed President Raphael Bostic said the central bank could be in a position to pause rate hikes sometime this summer.
- However, Fed Governor Christopher Waller maintained a hawkish view, saying rates could peak higher if labour and inflation numbers don’t cool as expected.
- US stocks also erased losses from earlier in the session when robust jobs data pointed to a still-tight labour market and opened the door for further rate increases.
Bonds:
- US 10 Year Note Bond Yield was 4.04 percent on Friday March 3, according to over-the-counter interbank yield quotes for this government bond maturity.
- Yields remain elevated, as Fed governors remain concerned about the strength of the jobs market that adds to inflation.
- On Thursday, Weekly unemployment benefits fell by 2,000 from the previous week to 190,000 on the week ending February 25th, below market expectations of 195,000.
- The latest value remained close to the nine-month low of 183,000 hit at the end of January,
- giving further evidence that the US labour market remains tight in part to reduced labour force participation.
- This could force employers to raise wages to attract and keep staff, adding to further inflationary pressure in the world’s largest economy.
Yesterday
- The Dow added 341 to 33,003
- The Sp500 gained 29 to 3,981
- The Nasdaq added 83 11,482
:  image: Trading economics
OVERNIGHT HEADLINES
The Dollar
- The dollar index steadied near 105 on Friday as investors continued to assess the outlook for Federal Reserve monetary policy in light of recent commentary from central bank officials.
- Atlanta Fed President Raphael Bostic supported keeping rate increases at 25 basis point increments and said the central bank could be in a position to pause rate hikes sometime this summer.
- However, Fed Governor Christopher Waller maintained a hawkish view, saying rates could peak higher if labour and inflation numbers don’t cool as expected.
- On Thursday, the greenback gained about 0.6% after fresh data continued to point to a tight labour market, reinforcing expectations that rates will need to stay higher for longer.
- Investors now look ahead to US services activity data and further central bank commentary on Friday. FX NEWS
Asian markets
- In Japan, the Nikkei 225 rallied 1.56% to close at 27,927, hitting their highest levels in at least two months and tracking gains on Wall Street overnight.
- This after Atlanta Fed Bank President Raphael Bostic backed smaller 25 basis point rate increases and said the central bank could be in a position to pause rate hikes sometime this summer.
- Investors also digested data showing the unemployment rate in Japan edged down to 2.4% in January, while the country’s services sector posted strong growth in February.
- All sectors advanced on Friday.
- In China, the Shanghai Composite fluctuated around the flatline on Friday as investors turned cautious ahead of the annual National Party Congress which kicks off this weekend, where authorities could communicate economic targets and plans.
- Investors also digested data showing China’s services sector expanded sharply in February as a result of the country’s exit from strict Covid curbs.
- Mainland stocks traded mixed on Friday, but the benchmark indexes are on track to end the week higher. REUTERS
Crude oil
- Brent crude futures traded above $84/bl on Friday and were on track to finish the week higher as hopes for a rebound in Chinese demand overshadowed concerns about further policy tightening from the Federal Reserve.
- Data this week pointed to a surge in manufacturing and services activity in China, and top executives from Chevron Corp and Saudi Aramco offered an upbeat demand outlook for the world’s top crude importer.
- On the supply side, Russia has revealed its plans to cut oil exports from the western ports by up to 25% in March, exceeding its output curbs of 500,000 barrels per day announced previously.
- Meanwhile, stronger-than-expected US economic data and hawkish remarks from Fed officials reinforced expectations that the central bank would keep raising interest rates to combat inflation. GULF ENERGY NEWS
Gold
- Gold firmed up near $1,840/oz on Friday and was on track to end the week higher, as investors reassessed that outlook for US Federal Reserve monetary policy in light of recent commentary from central bank officials.
- Atlanta Fed President Raphael Bostic supported keeping rate increases at 25 basis point increments and said the central bank could be in a position to pause rate hikes sometime this summer.
- However, Fed Governor Christopher Waller maintained a hawkish view, saying rates could peak higher if labour and inflation numbers don’t cool as expected.
- Meanwhile, data pointing to continued labour market tightness in the US and stronger-than-expected eurozone inflation data kept markets on edge about the prospect of further central bank policy tightening.
- Gold is highly sensitive to the rates outlook as higher interest rates as higher interest rates raise the opportunity cost of holding non-yielding bullion and vice versa. KITCO METALS
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