View this email in your browser

Morning NOTE

31 August 2022


The ZAR continued to weaken on the back of negative risk sentiment as inflation worries continues across the globe.


  • The Rand weakened to 17.0100, a loss of 1.85%, from levels reached pre-Jackson hole.

  • Negative risk sentiment dominating investor minds as stocks lower across the board. 
    • The move however stalled after Fed president Bostic, said he would still be driven by data.
    • He also remarked he would be open to a 50 bps hike if data supported it.
    • Traders saw this as a positive and the comments stalled the sell-off. The SP500 recovering back above the 4000 level at the time of writing.
  • US yields however reman elevated with the 10YT trading at 3.09%. In addition the 2 year hit 3.48 %, the highest since 2007.
    • The rising yields will remain supportive of the US dollar in favour of risk currencies like the ZAR, NZD and other EMFX.
    • The level of “inversion” strongly pricing in recessionary headwinds for the world’s largest economy.
  • Inflation
    • Germany printed 7.9% YOY  vs 7.5% previous.
    • It was the highest since the 1990’s re-unification when East Germany joined West Germany after the fall of the Berlin wall.
    • The energy crises the leading contributing factor remains the natural gas energy crises.
    • This likely to add to “hawkish” ECB views.

Significant Market Data; Eurozone Inflation



    • 12H30 :  Fed president BOSTIC SPEECH (see comments above)



  • Expect a weaker ZAR as the market continues to track international developments.
  • The local unit expected to remain under pressure ahead of the EU inflation report.
    • In addition, constant FED chatter continues to drive sentiment as governors double down on the “ rates higher for longer” narrative.
    • This will continue to support the US Dollar at the expense of every other currency.
    • Markets continue to drift towards Friday’s NFP report, but don’t expect a stronger ZAR in this environment,
  • A break of 17.0000 opens up 17.0800 before targeting 17.2000
    • On the downside USDZAR at 16.9200-16.7800 opportunities to exact cover for importers.

Expected Ranges

  • USDZAR :  Expect a range 16.7800-17.0800
    • Importers 16.8800-16.7800
    • Exporters 16.9800-17.0800
  • EURZAR :  Expect a range of 16.8300-17.1300
    • Importers 16.9500-16.8300
    • Exporters 17.0400-17.1300
  • GBPZAR :  Expect a range of 19.6500-19.9500
    • Importers 19.7300-19.6500
    • Exporters 19.8300-19.9500


  • USDZAR 16.9300
  • EURZAR 16.9700
  • GBPZAR 19.7800


  • Phala-Phala

    • Ramaphosa refused to answer questions in parliament following a Q&A in parliament.
      • He once again cited investigative processes during a question and answer session in the House, for not providing details on what transpired.
      • Opposition parties were incensed and they argued that Ramaphosa failed to provide a sound legal reason for not answering their questions.
      • “I’ve been counselled and advised that it’s best to address this matter when those processes have been done,” the president said.
      • But opposition party whips would not accept this explanation. EWN
  • Following the expiration of Zimbabwean visa programme later in the year, Rampahosa hit back at those accusing SA of being a Xenophobic country.
    • The President added that migration must follow legal prescripts.
    • Ramaphosa said many people enter South Africa legally, and have a right to do so – just as South Africans travel to other parts of the continent to trade, conduct business or invest.
  • SA farmers are expected to harvest 8% less maize in the 2021/2022 season compared with the previous season.
    • This was according to the government’s Crop Estimates Committee (CEC) said on Tuesday.
    • The CEC’s latest summer crop forecast estimates the 2022 harvest at 15.004 million tonnes, down from the 16.315 million tonnes harvested last season.
    • The harvest is expected to consist of 7.637 million tonnes of white maize, used for human consumption, and 7.367 million tonnes of yellow maize, used mainly in animal feed. Moneyweb


  • US markets recovered after a negative session on the back of rate hike fears.
    • In regular trading on Tuesday, the Dow fell 0.96%, while the S&P 500 and Nasdaq Composite each tumbled about 1.1%.
    • All three benchmarks are on track to finish August with losses, retracing about half of the summer rebound.
  • Futures finding some support after the major averages declined for the third straight session.
    • Investors continued to grapple with the Federal Reserve’s aggressive plan to stamp out inflation.
  • In the latest central bank commentary, New York Fed President John Williams told Wall Street Journal he expects interest rates to continue higher and to remain at those levels until inflation is subdued.
    • He added he is also in the higher-for-longer camp when it comes to monetary policy.


  • The yield on the 10-year US Treasury note climbed above 3.1% for the first since June 29th, as interest rates are set to continue to rise.
    • At his Jackson Hole Symposium, Fed Chair Powell reiterated the need for restrictive monetary policy for some time to bring inflation down.
    • Money markets are now pricing a 70% chance the Fed will hike rates by 75 bps at its September meeting.
    • Meanwhile, the 2-year Treasury yield hit 3.48%, its highest level since November of 2007.
    • The market now eagerly awaiting Friday’s NFP report.
  • In Germany, the yield on the 10-year Bund traded at the 1.5%. It was around two-month highs on the back of expectations of aggressive rate hikes by major central banks.
    • ECB policymakers considering a 75bps rate hike in the central bank’s next meeting, citing elevated risks that inflation could become entrenched in expectations.
    • Earlier German inflation reached levels not seen since the 1990’s, with YOY CPI at 7.9% .
    • The market now waiting for Eurozone composite inflation at 11h00.


  • The Dow declined 308 to 31,790
  • The SP500 fell 44 to 3,986
  • The Nasdaq  fell 134 to 11,883

Futures Trading:

  • image : Trading economics


  • Asian markets following Wall street, lower as the region continues lower across the board.
    • In Japan, the Nikkei 225 fell 0.37% to close at 28,091, sliding toward their lowest levels in three weeks and following a negative lead from Wall Street.
      • Sentiment remains negative as the Federal Reserve’s commitment in bringing down inflation hurt sentiment.
      • In the latest Fed commentary, New York Fed President John Williams told Wall Street Journal he expects interest rates to continue higher and to remain at those levels until inflation is subdued.
    • In Australia, the ASX 200 declined to 0.16% to close at 6,987.
      • The index lower after hitting 4-week lows earlier in the session. Stocks lower losses in energy and mining stocks amid softer commodity prices.
      • Overnight losses on Wall Street also weighed on sentiment as the US Federal Reserve remains committed to fighting inflation with higher interest rates, even at the risk of a recession.
      • Australian miners also declined on weaker iron ore prices, led by heavyweight firms BHP Group (-2.6%), Fortescue Metals (-2.3%) and Rio Tinto (-0.9%).
  • Brent crude oil remained near the  $100/bl, but were still on track to decline for the 3rd straight month.
    • Traders citing lower prices on the back of  weakening demand as aggressive rate hikes by major central banks threatened global growth.
    • On the supply side, recent violent clashes in Libya and Iraq kept markets on edge, but oil output in both OPEC members remain largely unaffected.
    • Talks to revive the Iran nuclear deal have also dragged on, but a potential boost in the country’s oil exports is likely to be offset by OPEC+ production cuts.
    • Elsewhere, industry data showed a modest build in US crude inventories. Gulf energy
  • Gold prices remained under pressure at $1,720/oz and likely to run into a 5th monthly drop.
    • The metal is down more than 2% so far in August, reversing all the gains made earlier in the month.
    • New York Fed President John Williams told Wall Street Journal on Tuesday that he expects interest rates to continue higher and to remain at those levels until inflation is subdued, echoing recent comments from Fed Chair Jerome Powell.
    • Elsewhere, the European Central Bank is reportedly considering a bigger 75 basis point rate hike to tackle inflation ahead of its policy meeting next week.
    • The yellow metal under pressure in rising interest rate environments.  Kitco metals
  • The US dollar stabilised at 108.5 after a strong rally following the Jackson hole symposium.  
    • The Buck underpinned by firm expectations that the Fed will keep interest rates elevated until inflation falls back down within target.
    • New York Fed President John Williams told Wall Street Journal on Tuesday that he expects interest rates to continue higher and to remain at those levels until inflation is subdued.
    • Markets are currently priced for another supersized 75 basis point rate hike in September, ahead of the US nonfarm payrolls report due on Friday that could influence expectations.

    • Natural gas prices in Europe tumbled to below €260 per megawatt hour.
    • Last week, prices spiked a nearly 40% jump last week.
    • Germany said its gas storage facilities are set to be 85% full by next month, earlier than the October target. In spite of the relief, for now, supplies remain scarce and the outlook heading into the winter is still very uncertain.
    • Russia’s Gazprom is due to stop deliveries to Europe through Nord Stream for three days starting Wednesday, having already reduced flows through the pipeline to roughly 20%.
    • And Norway, which has overtaken Russia as the biggest gas supplier to Europe in the wake of the war in Ukraine, will curtail its gas exports amid planned and unplanned maintenance at 13 fields and processing plants throughout September.

Copyright ©
2022 RussellStone Treasury 
All rights reserved.

Our mailing address is:

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.