The ZAR continued its bullish trend, but stabilising below the R17/$ level of today’s 10h00 Phala-Phala report.
- The Rand stabilised around the 17 handle ahead of today’s important report regarding the burglary at President Cyril Ramaphosa’s farm.
- An independent committee was instructed by parliament, to examine the facts to see if CR has broken the law and was likely to face criminal charges.
- Those include breaching of the country’s foreign exchange controls, as it was alleged that approximately $4mio was hidden at his farm .
- CR has so far pleaded innocent, but markets will be eagerly awaiting the report.
- Already, the DA has voiced concern saying they will appeal if CR is exonerated.
- All of this leading into a very important December as we head into another ANC leadership battle that will effectively determine SA next president.
- On the data front,
- Tuesday STATS SA, reported SA’s unemployment rate at 32.9%, down from the 33.9% in the previous report, it also beat market expectations.
- It all added to 15.76million employed persons and 7.7million unemployed persons.
- Internationally, US yield drifted higher ahead of tonight’s speech by FED chair Jerome Powell, and the market will once again turn their attention to the language he uses.
- The language will give us clues into the thinking of the world’s largest central bank and the rate policy going forward.
- Markets continue to price for a 50bps hike in December.
- The reduction in pace of rate hikes has placed the Dollar under pressure across the board , and the ZAR remains one of he chief beneficiaries.
- We also await the key US jobs report on Friday.
- US 10YT 3.72%
- US dollar index 106.64
**Key risk events : PHALA-PHALA REPORT & US GDP DATA
Significant Market Data:
- 10H00 : SECTION 89 PHALA-PHALA REPORT PRESENTED TO THE SPEAKER OF PARLIAMENT
- 14H00 : SA BALANCE OF TRADE R+24BN VS R19.7 BN PREVIOUS
- 15H30 : US GDP GROWTH +2.7% EXPECTED VS -0.6% PREVIOUS, ESTIMATE Q3
- 20H00 : US FED CHAIR JEROME POWELL SPEAKS
- 15H30 : US PCE INDEX 5.9% CONSENSUS VS 6.2% PREVIOUS
- 17H00 : US PMI MANUFACTURING 49.8 EXPECTED VS 50.4 PREVIOUS
- 15h30 : US NON-FARM PAYROLLS +200K EXPECTED VS +261K PREVIOUS
- 15h30 : US UNEMPLOYMENT RATE 3.7% EXEPCTED VS 3.7% PREVIOUS
- The ZAR opening stronger but at the bottom end of the USDZAR range (16.9000) ahead of Phala-Phala gate and Powell’s speech tonight.
- The local unit continues to outperform on the back of a weaker dollar as lower US yields pressurise the Greenback.
- Ahead of Friday’s key jobs report, the trade for now remains a SELL USDZAR on RALLY trade.
- Asian markets also mixed with no real directional bias , leads us to believe the ZAR will trade in a narrow range ahead of the 2 key events.
- US10YT yields also flat lining at 3.70%, showing no directional conviction.
- Event risk : RISK OFF – if CR is formally accused to face charges of impeachment .
- But given the ANC’s majority he would likely survive any such vote.
- So any sell off in the ZAR would be short lived.
- Therefore, the key event remains – Powell’s comments on US rate trajectory for December and into 2023.
- NB: Current data shows a slowdown in US inflation, and this will likely leads to a slowdown in Fed policy .
- Ultimately resulting in a stronger ZAR on the back of retracing Dollar.
- Trade : SELL USDZAR ON RALLIES , BREAK OF 16.9000 OPENS UP TO 16.8000
- USDZAR : Expect a range 16.8600-17.0700
- Importers 16.9300-16.8600
- Exporters 17.0000-17.0700
- EURZAR : Expect a range of 17.4400-17.6500
- Importers 17.5100-17.4400
- Exporters 17.5800-17.6500
- GBPZAR : Expect a range of 20.1900-20.4400
- Importers 20.2600-20.1900
- Exporters 20.350020.4400
- USDZAR 16.9500
- EURZAR 17.5500
- GBPZAR 20.3200
- 10h00 : Wednesday, 30 November 2022, could mark a key turning point in President Cyril Ramaphosa’s political future.
- An independent panel is expected to hand over its report to Parliament on whether or not Ramaphosa should face an impeachment inquiry.
- The 3-member panel chaired by former Chief Justice Sandile Ngcobo has been considering a complaint from the African Transformation Movement.
- Already, DA chief John Steenhuisen has warned that the opposition will appeal if the panel doesn’t find against CR. EWN
- South Africa’s recent unemployment data shows that industry has adapted to the country’s electricity crisis.
- The country seems to be on the mend in terms of employment, with 204,000 jobs gained in the second and third quarters of this year.
- The unemployment rate has dropped by a percentage point from 33.9% in the previous quarter to 32.9% in the latest.
- However, data points to the fact that even with the recovery SA remains a place with the most joblessness in the world. STATS SA
- Eskom diesel crises
- Two security guards were arrested on Monday, for stealing almost 6,000 litres of diesel.
- They were employed by a company contracted by Eskom to protect the Port Rex power station in East London. News 24
- Price drop
- The Central energy fund also announced Petrol prices to be hiked between 38-48cents a litre, but that diesel could drop between R1.29-R1.35/litre.
- With oil prices lower almost 11% for the month, following the sharp drop in August, SA road users will experience some relief.
- This also as demand worries out of China continues to pressure prices.
- Demand likely to be affected as China’s daily Covid-19 cases hit new record highs and newer stricter lockdowns are being enforced, which will hit China’s economic growth. News24
- US stock futures held steady on Wednesday .
- Traders are cautiously awaited Federal Reserve Chair Jerome Powell’s speech that could offer fresh clues on future rate hikes.
- In regular trading on Tuesday, the Dow ticked up 0.01%, while the S&P 500 and Nasdaq dropped 0.16% and 0.59%, respectively.
- Those moves came as investors worried about further monetary tightening and its implications on growth.
- This after key Fed officials said that interest rates will continue to rise well into next year as inflation remains stubbornly high.
- Markets now turn their attention to Powell’s appearance at the Brookings Institution for more guidance.
- Investors also look ahead to a raft of US economic data on Wednesday, as well as more earnings reports.
- The yield on the US 10-year Treasury, consolidated around 3.7%, a level not seen since October 4th.
- Traders going against the language of FED stalwarts Bullard and Williams by betting on a policy pivot.
- i.e. recession over inflation.
- Minutes from the last Federal Reserve meeting showed officials see the case for a slower pace of interest rate rises.
- This outlook for monetary policy is decoupling from the one seen for Europe.
- The ECB reassured markets that its tightening cycle is far over despite the continent heading for a recession in the last quarter of 2022.
- Germany’s 10-year Bund yield, the European benchmark, rebounded from a two-month low to around 1.9%.
- The Dow added 3 points to 33,852
- The SP500 fell 6 points to 3,957
- The Nasdaq fell 65 points to 10,938
- In Japan, the Nikkei 225 Index fell 0.21% to close at 27,969, sliding for the fourth straight session, with technology stocks leading the decline.
- Investors also turned cautious ahead of US Federal Reserve Chair Jerome Powell’s speech later in the global day that could guide the rates outlook.
- Moreover, investors reacted to data showing industrial activity in Japan fell more than expected in October.
- In China, the Shanghai index fluctuated around the flatline on Wednesday as investors digested data from China.
- Data showing Chinese manufacturing and services activities in November declined at the steepest pace since April.
- Analysts citing surging Covid cases and tighter curbs weighed on the economy.
- Investors also continued to track Covid developments after Chinese health officials announced on Tuesday that they would bolster vaccination among senior citizens.
- This was seen as a key move by experts for economic reopening, as widespread protests put pressure on the government to dial back strict Covid restrictions. Reuters
- The US dollar index held above 106.5 on Wednesday.
- The buck consolidating recent gains as investors geared up for Jerome Powell’s remarks later today that could offer fresh clues on future rate hikes.
- The greenback rose more than 1% in the prior three sessions as key Fed officials signalled that interest rates could peak higher than previously anticipated.
- Citing that inflation remains stubbornly high.
- St. Louis Fed Presidents James Bullard & Williams said the policy rate needs to rise to at least 5%, and that rates need to rise further and stay high through next year.
- but, the Fed is widely expected to slow the pace of tightening to 50 basis points in December after delivering four straight 75 basis point increases.
- Investors also look ahead to the key monthly jobs report on Friday. FX NEWS
- US WTI crude oil rose towards $79/bl after an industry report pointed to a large drop in US crude inventories.
- Adding to supply cuts woes, with the OPEC+ meeting stoking fears of more production cuts.
- API data showed that US crude inventories fell by almost 8 million barrels last week, far exceeding expectations for a 2.487 million barrel decrease.
- On the demand side, oil prices were also lifted by news that China would bolster vaccination among its senior citizens.
- This on the back of growing pressure on the world’s top crude importer to pursue economic reopening following widespread protests. Gulf energy news
- Gold traded above $1,750/oz.
- the yellow metal remains supported against a subdued dollar on the back of lower Us yields.
- Traders casting a firm eye on US Federal Reserve Chair Jerome Powell’s speech later today that could guide the rates outlook.
- Meanwhile, investors remain cautious as Fed officials signalled that interest rates will continue to rise well into next year to get ahead of inflation.
- Still, the Fed is widely expected to slow the pace of its rate hike to 50 basis points in December after delivering four straight 75 basis point increases. Kitco metals