The ZAR consolidated around the 18.1000 level, on the back of improved investor risk sentiment.
- The Rand held onto hard fought gains as investor confidence improved following US Treasury assurances that banks would be supported in the event of a another bank run.
- In New York risk assets continued to attract demand with the major averages sharply higher during Wednesday’s regular session.
- In addition, investor confidence also lifted by expectations that interest rates would soon peak and the banking crisis will continue to abate.
- With the bank crises abating, investors turning their attention to the FED’s preferred inflation gauge, PCE .
- Traders looking for further clues into the central bank’s next move.
- Interest rate markets bets are now equally split between the 25 basis point rate hike and a pause during the regulator’s policy meeting in May.
- Today, we also have the South African Reserve Bank (SARB) MPC meeting,
- Analysts of the opinion that the repo will be adjusted by 25 bps.
- The SARB continues to adjust monetary policy as it attempts to bring CPI back into the 3%-6% band.
Data this week
- 08h00 : PRIVATE SECTOR CREDIT YOY 8.62% EXPECTED VS 8.42% PREVIOUS
- 11H30 : SA PPI YOY 13.1% EXPECTED VS 12.7% PREVIOUS
- 14H30 : US GDP GROWTH RATE 2.7% EXPECTED VS 3.2% PREVIOUS
- 14H30 : US JOBLESS CLAIMS 196K EXPECTED
- 15H00 ; SOUTH AFRICA SARB MPC RATES DECSION
- EXPECTED 25 BPS HIKE .
- PRIME OVERDRAFT AT 11%
- 14H30 : USA PCE 5.1% EXEPCTED VS 5.4% PREVIOUS
Market Movement Today:
- The ZAR trading stronger in early Johannesburg trading following a risk rally in New York on Wednesday.
- The local unit finding support near the 18.1000 level as traders await today’s SARB MPC rate decision.
- Gains should however be capped, as we expect international bond portfolio managers and holders of SA bonds to hedge their exposures with Dollar buying.
- Currently, the market is priced for 25 bps and we expect the ZAR to find directional impetus after the rate decision.
- In addition, this afternoons US GDP, likely to drive US RATES, and a higher than expected PCE print likely to add to Dollar gains.
- This on the back of a Fed determined to bring inflation down to 2%.
- With the dust settling around the banking crises following congressional hearings this week, we expect the inflation theme to once again dominate sentiment.
- 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
- USDZAR : Expect a range 17.9900-18.2300
- Importers 18.0700-17.9900
- Exporters 18.1500-18.2300
- EURZAR : Expect a range of 19.5000-19.7400
- Importers 19.5800-19.5000
- Exporters 19.6600-19.7400
- GBPZAR : Expect a range of 22.1300-22.4300
- Importers 22.2300-22.1300
- Exporters : 22.3300-22.4300
- USDZAR 18.1000
- EURZAR 19.6200
- GBPZAR 22.3000
- South Africans in debt will be watching very carefully in the week to see if their personal budgets will be stretched, once again.
- There were several increases in the repo rate by the South African Reserve Bank (Sarb) over the past year.
- And the MPC is expected to announce its latest decision on the repo rate on Thursday.
- Markets are priced for +25 bps.
- The cost of living was also on the rise, with another increase in petrol prices expected next week.
VS CAPE TOWN
- Mayor of Cape Town Geordin Hill-Lewis said that he was confident the city would be the first metro to break away from the suffocating load shedding.
- Following the City of Cape Town’s attempt to move away from Eskom as its only power supplier,
- New Tshwane mayor , Cilliers Brink, had been given a list of orders which included removing the city from Eskom’s supply grid.
- Residents in the capital city finally have a new mayor after the resignation of former mayor, Randal Williams, left them leaderless for almost two months. Ewn
- A delay in completing maintenance at Eskom’s sole nuclear power station is worrying as South Africa heads into winter.
- This as electricity demand increases, according to Alan Winde, premier of the Western Cape province.
- Work on the Koeberg plant north of Cape Town has stalled and is running weeks late, adding to energy shortages that have led to daily power cuts to protect the system from a complete blackout.
- “We can’t be behind right now,” Winde said. “We’ve got to be on time, on budget.” Moneyweb
- On Wednesday, the Dow gained 1%, the S&P 500 jumped 1.42% and the Nasdaq Composite surged 1.79%.
- All 11 S&P sectors finishing higher led by real estate, technology and consumer discretionary.
- US stock futures were little changed on Thursday after the major averages rallied sharply during Wednesday’s regular session.
- Traders citing expectations that interest rates would soon peak and the banking crisis will continue to abate.
- Futures contracts tied to the three major indexes drifted flat to slightly negative..
- Mega-cap technology names helped the rally, with strong gains from Tesla (2.5%), Nvidia (2.2%), Apple (2%), Microsoft (1.9%) and Amazon (3.1%), among others.
- Investors now await more US economic reports this week to guide the outlook, as well as remarks from several Federal Reserve officials. Reuters
- The US 10-year Treasury 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, signs of persistent price growth and a tight labour 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. CNBC
- The Dow added 323 to 32,717
- The SP500 gained 56 to 4,027
- The Nasdaq added 210 to 11,926
image: Trading economics
The US Dollar
- The US dollar strengthened against a basket of major currencies on Thursday.
- The Buck bouncing back toward the 103 mark, after facing pressure earlier in the week as investors reassessed the outlook for monetary policy.
- The Federal Reserve delivered a widely expected 25 basis point rate hike last week and hinted it was close to pausing its rate-tightening cycle amid turbulence in the banking sector.
- Still, Fed Chair Jerome Powell said the officials didn’t see rate cuts for 2023, while investors have priced in about a 50% probability that the US central bank will raise rates by another 25 bps at its next meeting.
- All eyes now turn to a critical measure of PCE , US inflation and several speeches from Fed officials this week.
- The most pronounced buying activity was against the yen, which was volatile as the end of the Japanese fiscal year looms. FX NEWS
Asian markets mixed across the region following a strong rally on Wallstreet as investors turn their attention to the FED’s PCE inflation gauge on Thursday.
- In Japan, the Nikkei 225 Index fell 0.36% to close at 27,783, retreating from two-week highs as investors took some profits off the table following a solid run-up.
- Positive news involving China’s technology sector, expectations that major central banks would soon pause interest rate hikes,
- and easing concerns about the recent banking turmoil boosted risk sentiment
- In Australia the ASX 200 Index climbed 1.02% to close at 7,122, hitting its highest levels in nearly three weeks.
- Stocks tracking a technology-led rally on Wall Street overnight, as investors grew more optimistic about the outlook for interest rates and the banking sector.
- On Wednesday, Australia’s monthly CPI indicator showed further easing in February,
- supporting expectations that the Reserve Bank of Australia would pause its interest rate hikes.
- Technology stocks led the advance, and other index heavyweights also posted notable gains, including BHP Group (2.4%). Reuters
- US WTI crude futures fell toward $72.5/BL on Thursday, sliding for the second straight session.
- Official US data showed that US crude inventories unexpectedly declined by 7.5 million barrels last week, defying expectations for a 0.09 million barrel rise.
- The US oil benchmark also remains up about 5% this week as a dispute involving Kurdish authorities halted exports of around 400,000 barrels a day from the Ceyhan port in Turkey, tightening the market.
- ALSO, Saudi Arabia, once again, said the oil cartel should keep supplies steady for 2023 as it navigates a fragile recovery in global oil demand, recently clouded by the banking turmoil. Bloomberg
- Gold steadied around $1,965 an ounce on Thursday after falling in the prior two sessions.
- Investors continued to monitor risks to the global financial system.
- US banks’ top regulator who appeared before Congress this week indicated that failures at Silicon Valley Bank were due to poor risk management, rather than broader systemic across the financial sector.
- Meantime, the White House reportedly is preparing for federal banking regulators to impose new rules on mid-size banks.
- Traders now look ahead to core US PCE data for clues on the Federal Reserve’s next move as well as remarks from several Fed