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Morning NOTE

3 October 2022


The ZAR once again maintained trading inside the wider range of 18.2200-17.8000 , as market participants await new information.


  • The Rand fluctuated in a relatively narrow range 18.1000-17.9000, as markets pause following a tumultuous previous week.
    • The market relatively stable after Risk assets once again traded lower, in the first trading day of October.
      • The SP500 breaching 3,600 as investors continue to worry about future Fed rate hike decisions.
  • The drop in volatility likely to be short lived as we are once faced a with a crucial NON-FARMS PAYROLLS report on FRIDAY.
    • Markets expecting a gain of 250k for September vs 315k previously and an unemployment rate of 3.7%.
      • Coupled with a US10YT trading at 3.78% ( at the time of writing ), traders will pay close attention to the Jobs report and the effect it could have on Fed policy.
      • A weaker than expected report likely to cause a drop in yields and a rally in risk assets ( i.e. stronger ZAR)
        • And likewise,
      • A Stronger than expected report likely to cause a rise in yields and drop in risk assets ( ie. Weaker ZAR).
  • Investors’ concerns keep on growing that sky-high inflation and higher interest rates, will combine to bring about a global recession.  
    • The terminal rate, the peak spot where the federal funds rate is, is now seen at 4.6%, with policymakers anticipating cutting interest rates in 2024 and extending that into 2025.
      • Also, last week,
      • The Fed’s preferred inflation measure,
        • the US core personal consumption expenditures (PCE) price index, came well above expectations, underscoring the challenging macro environment.
  • All of this likely to keep the ZAR under pressure in the early weeks Q4.
  • Eskom as well as Ramaphosa’s leadership and the challenge he might face at the end of the year continues to occupy investor minds.

Significant Market Data


  • 16h00 : US PMI 52.2 VS 52.8




  • We opening in the middle of the range 18.0000, on the back of lack lustre trading in the Asian session.
    • Traders looking for “more “ news to drive directional bias on the first day of trading for October.
    • This likely to come from NFP on Friday, or as we get closer to the release.
    • Markets flat-lining after enduring heavy losses in September, with the SP500 losing 9.3%, as rate concerns continue to hang over investors.
      • The ZAR also losing 5.8% against a rampant US Dollar.
  • NB: Market conditions remain the same for the first day of October trading and we expect a similar theme.
    • Inflation ;  higher interest rates , lower risk assets, and ESKOM for the ZAR.
  • The ZAR remains under pressure, as strong rallies in the Euro and Pound largely ignored.

  • Look to BUY USDZAR on dips.

Expected Ranges

  • USDZAR :  Expect a range 17.8500-18.1700
    • Importers 17.9300-17.8500
    • Exporters 18.0700-18.1700
  • EURZAR :  Expect a range of 17.5200-17.8500
    • Importers 17.6300-17.5200
    • Exporters 17.7400-17.8500
  • GBPZAR :  Expect a range of 20.000-20.4500
    • Importers 20.1200-20.000
    • Exporters  20.3300-20.4500


  • USDZAR 17.9800
  • EURZAR 17.6600
  • GBPZAR 20.2200


  • Cyril  Ramaphosa remains defiant that he has given his best as President.
    • He also said, that he did not believe that he abused his power, nor that there’d been a conflict of interest, in how he reported the theft on his Phala Phala farm.
    • He said aid that he believed the head of his protection unit, Wally Rhoode, would handle the matter appropriately.
    • He denied claims of money laundering, saying the money stolen from the farm was the proceeds of animal sales.
  • Public enterprises minister, Pravin Gordhan says he believes Eskom is once again being used as a political football after an era of state capture.
    • Appointing a new 13-member board on Friday, Gordhan said they had to stop workers who were deliberately disrupting operations at some power stations.
    • Gordhan says disruptive elements are coming from within the organisation
  • In addition, Eskom said that persistent high levels of breakdowns were forcing the continuation of stage 3 power cuts.
    • The utility said that the electricity generation capacity remained constrained.
  • King Charles III will next month host the first state visit of his new reign.
    • SA President Cyril Ramaphosa and his wife will be travelling to Britain, Buckingham Palace announced Monday.


  • US stock futures extended losses on Monday after the Dow and S&P 500 posted their worst month since March 2020 in September.
    • The theme driving prices lower remains aggressive monetary tightening and recession fears rages on.
  • For the month of September, the Dow fell 8.8%, the S&P 500 declined 9.3% and the tech-heavy Nasdaq Composite tumbled 10.5%.
    • Investor sentiment remains dampened at the start of the new quarter as still elevated inflationary pressures bolsters the case for further interest rate hikes, raising the risk of a recession.
    • Some analysts are also expecting a sharp short-term bounce from oversold conditions, but consider the long-term trend to remain on the downside.
    • Markets now look ahead to US Markit PMI and ISM manufacturing, as well as construction spending data due for release later in the global day. Reuters


  • The US 10YT yield traded at 3.78%  as growing concerns that sky-high inflation and higher interest rates will drag the nation’s economy into a recession.
  • The Fed’s preferred inflation measure, the US core personal consumption expenditures price index, came well above expectations, underscoring the challenging macro environment.
  • The 10-year has climbed almost an entire percentage point since early July, as expectations of an aggressive tightening from the Federal Reserve dented appetite for government debt.
  • The terminal rate, the peak spot where the federal funds rate is, is now seen at 4.6%, with policymakers anticipating cutting interest rates in 2024 and extending that into 2025. Source : US treasury


  • The Dow declined 500 to 28,725
  • The SP500 fell 54 to 3,585
  • The Nasdaq  declined 161 to 10,575


  • Asian markets mixed, with Japan higher on domestic issues but the rest of the region following Wallstreet lower.
    • In Japan, the Nikkei 225 jumped 1.07% to close at 26,216 , recovering from over 3-month lows.
      • Traders citing expectations that higher prices and a weaker yen will boost corporate profits of export-oriented Japanese companies.
      • Meanwhile, elevated inflationary pressures, rising interest rates worldwide and global recession fears kept markets on edge.
    • In Australia, the ASX 200 fell 0.27% to 6,457, closing at its lowest level in over 3 months.
      • Technology stocks extended their losses on fears that persistently high inflation would reinforce the case for further interest rate hikes.
      • Oil prices jumped more than 3% early on Monday following reports that OPEC+ was considering cutting output by more than 1 million barrels per day. Reuters
  • The US  dollar held steady above 112.
    • Monday sees as investors looked ahead to US manufacturing data and speeches from Federal Reserve officials for insight on the state of the world’s largest economy and to guide the rates outlook.
      • Markit PMI and ISM manufacturing data for the US are due for release later on Monday, while Fed officials Raphael Bostic and Thomas Barkin are set to give separate speeches.
      • The Buck stronger on the back of a Fed also forecasted rates to peak at 4.6% next year with no cuts until 2024, shooting down any dovish pivot that the markets were hoping for in the near term.
      • Global recession fears and the US economy’s relative strength also boosted safe-haven demand for the dollar at the expense of other assets. Fx news
  • Crude oil rallied more than 3% above $82/bl following reports that OPEC+ was considering cutting output by more than 1 million barrels per day to stop falling oil prices.
    • That could potentially be the biggest production cut since the height of the Covid-19 pandemic.
    • The move is also expected to attract the ire of the US and other major consumers which have been trying to stamp out inflationary pressures.
    • A surging Dollar that makes greenback-priced commodities more expensive for overseas buyers also weighed on oil prices, as well as Covid-related uncertainties in top crude importer China. Gulf Energy news
  • Gold traded higher on the back of a weaker Dollar. Gold above $1,660/oz .
    • Traders remain bearish and cited downside risks remain as major central banks are expected to continue raising interest rates aggressively to combat surging inflation.
    • Leading the pack, US Federal Reserve officials stressed the need last week to keep hiking rates to restrictive levels amid persistent inflationary pressures, even at the risk of slower growth and further market volatility.
    • Higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal.
    • The yellow metal lost nearly 3% in September for its 6th straight monthly decline, and is still down about 20% from this year’s high. Kitco metals

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