The ZAR continued to trade within its weekly range after the SARB’s rate surprise and also this week’s US FOMC.
The Rand remained within its trading range of 17.3500-17.0000, as markets brace themselves for this week’s US FOMC rate decision.
This morning we opening weaker on the back of a nervous start in Europe.
The range remains solid at 17.1800-17.2600 after a weaker start for markets in Europe.
Traders waiting for the FED’s first rate decision for 2023.
- This week we have the major central banks adjusting policy rates.
- i.e. the US FED , the BOE as well as the ECB.
- In addition, we have US Non-farm payrolls on Friday, preceded by EU inflation and jobs data
- we also have a list of PMI’s, including South Africa and the USA.
Central banks expected to hike by :
- The FED + 25
- The ECB + 50
- The BOE +50
- The data set however remains heavy and likely to add to excessive market volatility this week.
- We expecting a volatile session, but all data sets are pointing to a slowdown in economic activity and inflation.
- The Dollar index at 102
- The US10Yt 3.52%
Data this week
- 08h00 SA MONEY SUPPLY M3 YOY 8.9% EXPECTED VS 8.75% PREVIOUS
- 08H00 : SA PRIVATE SECTOR CREDIT EXTENSION 8.2% YOY VS 8.3% PREVIOUS
- 12H00: EU GDP GROWTH QOQ 0% VS 0.3% PREVIOUS
- 12H00: EU GDP GROWTH YOY 1.8% VS 2.3% PREVIOUS
- 14H00 : SA BALANCE OF TRADE R 5.5BN VS R7.9BN PREVIOUS
- 16H45 US CHICAGO PMI 44.9 EXPECTED VS 44.9 PREVIOUS
- 12H00 : EU UNEMPLOYMENT RATE 6.5% EXPECTED VS 6.5% PREVIOUS
- 12:00 EU INFLATION RATE 9.1% VS 9.2% PREVIOUS YOY
- 12:00 EU CORE INFLATION RATE 5.1% EXPECTED VS 5.2% PREVIOUS YOY
- 17H00 : US ISM MANUFACTURING PMI 48 EXPECTED VS 48.4 PREVIOUS
- 21H00 : US FED FOMC RATE DECISION + 25 EXPTECED , FED FUNDS 4.5% TO 4.75%
- 21;00: US FED CHAIRMAN JEROME POWELL SPEAKS.
- 14H00 : UK BOE RATE DECISION +50BPS EXPECTED FROM 3.5% TO 4%
- 14H00 : BOE MINUTES
- 15H15 : ECB RATE DECISION +50 BPS, RATE TO MOVE TO FROM 2.5% TO 3%
- 15H45 ECB PRESS CONFERENCE
- 15H30 : US NON FARM PAYROLLS +185K EXPECED VS +223K PREVIOUS
- 17H00 : US ISM SERVICES PMIS 50.3 EXPECTED VS 49.6 PREVIOUS
Market Movement Today:
- The ZAR opening weaker on Monday morning as risk assets retreat in early European trading.
- Traders happy to book profits in risk assets ahead of this week’s multitude of Central bank rates decision.
- Markets widely expecting the Fed to hike 25bps with the ECB and BOE likely to adjust policy rates by +50bps.
- The ZAR remaining inside its established range from 17.0000-17.3500, and likely only to breach either side on the back of the FED.
- In addition, we have US non-farm payrolls on Friday also adding to an already volatile data set this week.
- The FED’s PCE indicator however printed lower than expected on Friday, allowing Fed doves to become more prominent.
- We expect a dovish Fed on Wednesday, on the back of the data and this will result in a continuation of the risk rally.
- The ZAR likely to benefit in this environment.
TRADE : SELL USDZAR on rallies .
- USDZAR : Expect a range 17.0600-17.3300
- Importers 17.1500-17.0600
- Exporters 17.2400-17.3300
- EURZAR : Expect a range of 18.5700-18.8100
- Importers 18.6500-18.5700
- Exporters 18.7300-18.8100
- GBPZAR : Expect a range of 21.1500-21.4500
- Importers 21.2500-21.1500
- Exporters 21.3500-21.4500
- USDZAR 17.1900
- EURZAR 18.6800
- GBPZAR 21.2900
- EFF leader Julius Malema said it would pursue a private prosecution case against the Minister of Mineral Resources and Energy Gwede Mantashe for his role in state capture corruption.
- The State Capture Commission of Inquiry named Mantashe as one of the African National Congress (ANC) bigwigs who benefitted from the state’s ties with the late businessman Gavin Watson. iol
- ANC president Cyril Ramaphosa has admitted the governing party will face a difficult election campaign ahead of the hotly contested 2024 general elections.
- The party faced dwindling support at the polls in the previous national and local elections.
- High unemployment, corruption, poor service delivery and failing state institutions are believed to be among the reasons South Africans have lost confidence in the governing party.
- During his opening address the ANC’s two-day lekgotla, Ramaphosa called on party leaders to gear up for a tough fight to retain power.
- He vowed the party would address the country’s socioeconomic issues.
- The growing energy crisis would be at the top of the agenda. Ewn
- After the chaos of a few weeks ago, it has been reported that another tiger was on the loose in Edenvale
- A tiger was spotted roaming around parts of Edenvale in Ekurhuleni on Monday morning, the local community policing forum said.
- Edenvale CPF has since warned residents to be on the lookout and keep all animals indoors. A video of the animal has since surfaced.
- It shows the wild animal roaming around the yard of an office building at around 05:22. News24
- US stock futures eased on Monday as investors braced for corporate earnings reports from major firms and a pivotal interest rate decision from the Federal Reserve this week.
- Futures contracts tied to the three major indexes were all down at least 0.1%.
- Last week, the Dow gained 1.81%, the S&P 500 jumped 2.47% and the Nasdaq rallied 4.32%, with all three benchmarks on track to end January higher.
- Trader benefiting from slowing inflation, in the US and the case for a slower pace of central bank policy tightening.
- Investors now await the Fed’s policy decision on Wednesday where it is widely expected to deliver a smaller 25 basis point rate increase.
- Major companies are also slated to report earnings this week including Apple, Alphabet, Amazon, Meta Platforms, Exxon Mobil and Pfizer.
- US 10 Year Note Bond Yield was 3.51 percent on Monday January 30, according to over-the-counter interbank yield quotes for this government bond maturity.
- Markets keenly await the US Federal open market committee (FOMC) , rates decision on Wednesday.
- Last week the FED’S inflation gauge, the US PCE printed lower than expected and markers are pricing for a dovish FED.
- In the UK, the UK’s 10-year Gilt fell below 3.3%.
- Yields were hovering around its lowest level since December 14th, as doubts were raised about the BOE’S policy path after weaker-than-expected PMI data underscored the risk of the UK slipping into recession.
- The latest survey showed Britain’s business economic activity fell at its fastest rate in two years in January,
- Traders citing rising interest rates, strikes, and weak consumer demand due to the rising cost of living.
- Investors also believe the Bank of England will raise interest rates again to 4% at its next meeting but are split on how much further borrowing costs will rise beyond that.
- Meanwhile, the UK CPI eased as expected to 10.5% in December, but remained well above the Bank of England’s target of 2%. BLOOMBERG
- The Dow added 28 points to 33,978
- The SP500 gained 10 to 4070
- The Nasdaq added 109 to 11,621
- The US dollar remained around the 102 levels as traders cautiously awaited a key interest rate decision from the Federal Reserve this week.
- The US central bank is widely expected to deliver a smaller quarter-point increase on Wednesday.
- Traders will pay close attention to the press conference after the rate decision , for clues on the path for interest rate rises.
- In addition data released on Friday showed that the Fed-preferred core PCE inflation measure in the US slowed to an over one-year low in December,
- The data supporting the case for a slower pace of policy tightening.
- The Bank of England and the European Central Bank are set to decide on monetary policy this week as well, that will also affect the relative value of the dollar. FX news
Asian markets trading higher in early Monday trading following a strong rally on Wall Street on Friday. The Eastern markets joining in on positive risk sentiment.
- In Japan, the Nikkei 225 rose 0.19% to close at 27,433. Although higher, Japanese stocks struggling for direction ahead of key interest rate decisions from major central banks this week.
- This all headlined by an expected rate hike from the US Federal Reserve as well as ECB and the BOE.
- Last week, data also showed that Tokyo inflation exceeded expectations in January.
- The data indicating elevated nationwide inflationary levels and adding pressure on the Bank of Japan to tweak its policy of ultra-low interest rates.
- In China, the Shanghai Composite rose 0.14% to close at 3,269, hitting its highest levels in at least 5 months as mainland markets returned from the week-long Lunar New Year holidays.
- Stocks extending the January rally driven by China’s rapid reopening from Covid curbs and expectations of a slower pace of central bank policy tightening worldwide.
- Chinese authorities also said over the weekend that they would promote consumption recovery and seek to boost imports, bolstering the outlook in Asia’s largest economy.
- Growth-oriented new energy, technology and consumer-related stocks led the advanced. Reuters
- US WTI crude oil fluctuated near $80/bl as traders weighed hopes for a demand recovery in China and growing tensions in the Middle East.
- Traders discussing fears of a global economic slowdown and the resilience of Russian supply.
- Chinese authorities said over the weekend that they would promote consumption recovery as a major economic driver and boost imports, sparking demand optimism in the world’s top crude importer.
- In the Middle East, Israel carried out a drone strike against a target in Iran over the weekend, fuelling fears of supply disruptions.
- Meanwhile, the US oil benchmark dropped more than 1% on Friday as Russian oil supply remained robust despite Western sanctions amid strong demand in Asia.
- Investors also turned cautious ahead of key policy decisions from major central banks this week,
- The concerns remain that tighter financial conditions could finally tip the global economy into recession. Gulf energy News
- Gold remained near $1,930/oz, holding near its strongest levels in 9 months as investors remained on the side-lines ahead of a key interest rate decision from the Federal Reserve this week.
- The US central bank is widely expected to deliver a smaller quarter-point increase on Wednesday.
- Traders will also be watching for clues on the path for interest rate rises.
- Data released on Friday showed that the Fed-preferred core PCE inflation measure in the US slowed to an over one-year low in December.
- The lower than expected PCE supporting the case for a slower pace of policy tightening. Kitco metals report