View this email in your browser

Morning NOTE

 31 March 2023


The ZAR strengthened dramatically after the SARB surprised the market with a 50bps rate hike.


The Rand gained more than 2% after the SARB MPC surprised the markets with a higher than expected 50 bps rate hike.
Analysts and markets priced for a 25 bps hike on the back of a slowing economy and the continued Eskom induced power crises.

  • It was the 9th consecutive rate hike since policy normalization started in November 2021.
    • The repo rate adjusted to 7.75% and Prime overdraft to 11.25%
    • The rate move  bringing borrowing cost to the highest since May 2009.
    • The MPC revised significantly upward headline inflation for 2023,
      • now expected at 6% from 5.4% previously due to higher prices of core goods and food in the near term. source: South African Reserve Bank
  • Earlier in the session US GDP printed less than expected at 2.6% vs 2.7% expected. And jobless claims were inline with expectations at 198k.
    • Today the markets turning its attention to the US PCE ( personal consumption expenditure) with 5.1% expected vs 5.4% previous.
    • US Chicago PMI’S  also expected to print lower at 42-43.4, indicating the headwinds the economy currently faces

Markets comfortable that the worst of the banking crises might be over and focus turning once again to inflation.

Data this week


  • 14H30 : USA  PCE 5.1% EXEPCTED VS  5.4% PREVIOUS

Market Movement Today:

  • The ZAR dramatically stronger following the unexpected SARB MPC rate hike of 50bps.
  • Markets were fully priced for 25 bps, given the slowdown in inflation as well as the global baking crises.
    • The MPC however voted in favour of a 50bps hike vs 25bps expected sending the local unit rocketing higher.
    • The repo rate adjusted to 7.75% and Prime overdraft to 11.25%
    • The rate move  bringing borrowing cost to the highest since May 2009.
  • Carry investors jumping at the chance, especially after the decline in US yields
  • The generic SA yield at 9.88% vs the US10YT at 3.55%
  • In addition, the US PCE, likely to drive US RATES, and a higher than expected PCE print could to add to Dollar gains.
    • But a softer number would support the case for a weaker Dollar as Fed hikes come to an end.
  • This would be ZAR supportive.
    This morning we opening at 17.8500, near the lows of the week.
    Expect some profit taking for a bounce in the USDZAR rate ahead of the PCE print.
    The “mini trend” however in favour of the ZAR, due to the SARB’s actions.
  • Trade : the surprise rate hike, resulting in a stronger ZAR inside a new value range.
  • Buy 17.7500
  • Sell 18.0000

Expected Ranges:

  • USDZAR :  Expect a range 17.6700-17.9700
    • Importers 17.7700-17.6700
    • Exporters 17.8700-17.9700
  • EURZAR :  Expect a range of 19.3200-19.5600
    • Importers 19.4000-19.3200
    • Exporters 19.4800-19.5600
  • GBPZAR  :  Expect a range of 21.9700-22.2100
    • Importers 22.0500-21.9700
    • Exporters : 22.1300-22.2100


  • USDZAR 17.8500
  • EURZAR 19.4500
  • GBPZAR 22.1000


SARB MPC  surprises market and ordinary South Africans with a 50bps increase in the repo rate.

  • The bigger-than-expected repo rate hike announced by the South African Reserve Bank (Sarb) on Thursday will put even more pressure on those with home and car loans, immediately pushing up the cost of financing.
  • Delivering its second monetary policy statement of the year, the central bank hiked the repo rate by 50 basis points (bps) to 7.75% – pushing the prime lending rate of commercial banks to 11.25%. Moneyweb

Gordhan to lead visit to China over Transnet locomotives impasse

  • The state and the SOE hope to fast-track the delivery of locomotives and parts needed to rehabilitate SA’s rail network.
    • Efforts to end an impasse between Transnet and China Railway Rolling Stock Corporation will see Public Enterprises Minister Pravin Gordhan lead a delegation to China in April.
    • Transnet and Gordhan’s department are hoping the trip will help fast-track the delivery of locomotives and spare parts from CRRC as part of a crucial overhaul of South Africa’s rail network. Ewn

Former president Thabo Mbeki has suggested that the ANC used its majority in Parliament to vote against any investigations into the Phala Phala saga because it suspects that President Cyril Ramaphosa has done something wrong.

  • He added that the ANC wanted to protect Ramaphosa “at all costs”.
  • The comments are contained in an explosive 17-page letter, dated 29 March, that Mbeki wrote to ANC deputy president Paul Mashatile.
    • In the scathing letter, Mbeki asked why the ANC in Parliament had blocked any investigation into the Phala Phala saga, which he likened to the “Nkandla matter” involving former president Jacob Zuma.
  • He cited the ANC’s decision in December to use its majority in the National Assembly to vote against the establishment of an impeachment committee;
    • following the report of an independent panel which found that Ramaphosa had a case to answer on the matter. News24


In regular trading on Thursday, the Dow rose 0.43%, the S&P 500 gained 0.57% and the Nasdaq Composite jumped 0.73%, with all three benchmarks set to finish the week higher.

  • US stock futures remained steady on Friday after the market rallied for two straight sessions.
  • Investors are becoming more optimistic on the outlook for interest rates and the banking sector.
  • Futures contracts tied to the three major indexes drifted flat to slightly positive.
  • Ten out of the 11 S&P sectors ended in the green, with real estate, technology and consumer discretionary leading the advance, while financials was the sole decliner.
  • Data showed that US applications for jobless benefits rose last week, though they remained at historically low levels.
  • Investors now await a key US inflation measure on Friday, as well as remarks from several Federal Reserve officials. Bloomberg


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.
  • Today’s US PCE, the Fed’s preferred measure of inflation will be published to provide further clues into the central bank’s next move.
  • 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. Reuters


  • The Dow gained 141 to 32,859
  • The SP500 gained  23 to 4,050
  • The Nasdaq gained 87 to 12,013

  image: Trading economics


The US Dollar

  • The US dollar index held its recent decline to around 102.2 on Friday and was on track to decline for the second straight quarter.
    • The Buck weighed down by expectations that the Federal Reserve will end its tightening campaign soon amid easing inflationary pressures and efforts to avoid a wider banking crisis.
    • The Fed delivered a widely expected 25 basis point rate hike at its March meeting and hinted at just one more rate increase.
    • Meanwhile, money markets are currently pricing a 40% chance that the central bank will pause its rate hikes in May,
      • with rate cuts expected by year’s end. All eyes now turn to a critical measure of US inflation and several speeches from Fed officials on Friday. FX news

Asian markets

In Japan, the Nikkei 225 jumped 0.93% to close at 28,041, reaching their strongest levels in about three weeks and taking cues from a positive lead on Wall Street.

  • Traders citing expectations that major central banks would soon end their tightening campaign and on easing concerns about the recent banking turmoil.
  • Investors also digested mixed Japanese economic data, with the unemployment rate unexpectedly rising to 2.6%, while retail sales and industrial production grew more than expected.
  • Notable gains were seen from index heavyweights such as SoftBank Group (1.9%), Nippon Steel (3.9%), Mitsubishi UFJ (2.5%), Keyence (1.9%) and Sony Group (2.1%).
  • The Nikkei and Topix indexes both finished the week about 2.5% higher, rising for the second straight week

In Australia, ASX 200 Index gained 0.78% to close at 7,178 on Friday, rising for the fifth straight session and finishing the week up 3.2%, breaking seven consecutive weeks of losses.

  • Australian stocks tracked Wall Street higher on Friday amid expectations that major central banks would soon end their tightening campaign and on easing concerns about the recent banking turmoil.
  • Mining stocks led the advance on firmer commodity prices, with gains from BHP Group (2.5%), Rio Tinto (2.5%), Fortescue Metals (4.1%).
  • Technology, consumer and financial stocks also climbed, while energy firms lagged behind the market.

Crude oil

  • US WTI crude futures flat lined $74.5/bl on Friday and were headed for the second straight weekly advance.
    • Prices supported by supply concerns and an improving demand outlook.
    • OPEC’s de-facto leader Saudi Arabia also 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.
    • On the demand side, investors remain optimistic about China’s recovery.
    • Traders citing a rebounding domestic economy can help cushion the impact of slower global growth. Gulf Energy news


  • Gold steadied around $1,980/oz ounce on Friday and was set to gain more than 8% in March.
  • Traders betting that interest rates have likely reached near their peak in this tightening cycle.
  • Such expectations were driven by easing global inflationary pressures and efforts by major central banks to avoid a broader banking crisis.
  • The recent banking turmoil which started with the collapse of two regional lenders in the US also spurred safe-haven demand for gold this month.
  • Traders now look ahead to core US PCE data for clues on the Fed’s next move as well as remarks from several Fed officials. Kitco metals

Copyright ©
2023 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.