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Morning NOTE

4 April 2023


The ZAR consolidated around the 17.8000 level ahead of this week’s Jobs report.


The Rand consolidated near stronger levels ahead of Friday’s non farm payrolls report.

  • Markets turning its attention to the labour markets after benign inflationary data(PCE)  indicated a possible slowdown in the Fed’s cycle.
    • The banking crises, for now, a distant memory.
    • The upside surprises in the last two reading keeping investors on their toes.
    • The Fed continues to reference the labour market as a point of concern and the reason for their rate hikes.

End of the rate cycle?

  • Earlier this morning, The Reserve Bank of Australia held rates steady at 3.6% during its April meeting.
    • It was the first pause in the central bank’s hiking cycle since it started raising rates in May 2022.
    • The decision came amid efforts to account for policy lags, with the board adding it stands ready to resume raising borrowing costs should the economy need it.
    • Central bankers of the opinion that monetary policy effect usually lags 18 months.
  • The strong rally in the SP500 indicating investors happy to “bet” that the Fed cycle is fast approaching its conclusion.
    • The US10YT yield also declining to 3.42% on the same reasons as well as yesterday’s weak US ISM manufacturing data.
    • The Data disappointed to the downside, adding to concerns of headwinds for the US economy.
    • The index printing at 46.3 vs 47.7 expected.
      • The WEAK ISM data countering the surprise production cut from OPEC+
  • All of this will be ZAR supportive as risk assets find support after the recent turmoil in financial markets due to the banking crises.

Data this week









Market Movement Today:

  • The Rand well supported in early Joburg trading on the back of a weaker Dollar and positive risk sentiment.
    • The Dollar under pressure following weaker than expected US ISM data.
    • The data showing a slowdown in the US economy that could affect the FED’s rate hiking cycle.
    • Earlier this morning the RBA decided against raising rates as it adopts a wait and see approach.
    • Price pressures appears to be subsiding, and helping to the overall risk picture.
  • Risk assets rallying sharply with the SP500 up 8.4% since the lows hit due to the SVB failure.
    • Since then the FED’s return to QE and chances of lower rates emboldening investors.
    • Throw in an uber hawkish SARB with a 50bps hike and we can see how the ZAR gains are easily explained.
    • The ZAR likely to benefit from an environment of lower or stalling G7 interest rates.
    • Yesterday’s  weak US ISM ‘data supporting the ZAR and we now look forward to Friday’s all important NFP report.
    • SA 10y’s trading at 9.88 % of its highest yields of 10.24% in early March.
      • Vs
    • US 10YT 3.42%, indicating the yield /carry value will once again be ZAR supportive.
  • Today : expect some early profit taking in the London session as market makers clear out stops and fill order books.
    • There after we expect a stronger ZAR based on the current economic picture.
    • Trade : SELL USDZAR on Rallies.
    • Buy  17.7000
    • Sell 18.0000

Expected Ranges:

  • USDZAR : Expect a range 17.6800-17.9800
    • Importers : 17.7800-17.6800
    • Exporters : 17.8800-17.9800
  • EURZAR : Expect a range of 19.2700-19.5700
    • Importers : 19.3700-19.2700
    • Exporters : 19.4700-19.5700
  • GBPZAR : Expect a range of 21.9100-22.3000
    • Importers : 22.0400-21.9100
    • Exporters : 22.1700-22.3000


  • USDZAR : 17.8300
  • EURZAR : 19.4200
  • GBPZAR : 22.1300


Rate hikes

  • Last week’s SARB rate still a topic of major concern for South Africans.
    • 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%.
    • This is the ninth hike since the Sarb took on a combative fight to rein in stubbornly high inflation at the end of 2021; since then the repo rate has risen by a combined 425bps, from a Covid-era record low of 3.5%.
    • The knock-on effect of the cumulative increases has put pressure on household spending, as the cost of servicing debt becomes more burdensome. Moneyweb


  • The SA government’s failure to fix its visa system is seriously impeding the economy and needs to be urgently fixed, one of the nation’s main business-lobby groups said.
  • Tens of thousands of foreigners working or intending to work in South Africa faced having their visas cancelled at the end of March because the authorities were unable to process their applications
    • “We have major skills deficits in many areas,” BLSA Chief Executive Officer Busi Mavuso said in the statement;
  • “We need to give international companies the sense that they are welcome and the confidence to plan on investments;
    • without the fear that they will simply be unable to send their people because we cannot manage our own bureaucracy.” Moneyweb


  • National Treasury said the exemption that it granted Eskom did not mean that the power utility should not take appropriate steps to prevent irregular, fruitless, and wasteful expenditure.
  • The department said that the move was meant to prevent the power utility from receiving qualified audit opinions, among others.
  • National Treasury further said the exemption granted to Eskom would enable it to continue to fund its balance sheet and still maintain accountability and transparency.  Ewn


On Monday, the Dow and S&P 500 climbed 0.98% and 0.37%, respectively, helped by gains in energy stocks amid a jump in oil prices.

  • This morning US stock futures were little changed after the major averages ended mixed during Monday’s regular session.
  • Investors weighed a surprise production cut from OPEC+ and its impact on inflation and Federal Reserve monetary policy.
    • Futures contracts tied to the three major indexes drifted flat to slightly negative.
    • Meanwhile, the Nasdaq Composite lost 0.27%, weighed down by technology shares as investors were worried that the Fed may need to tighten policy further to keep inflation under control.
  • In corporate news, Tesla dropped 6.12% after the company missed first-quarter deliveries estimates.
  • Investors now await key economic data to be released during this week, including ISM Services PMI, JOLTS, ADP employment and the highly-anticipated NFP.


  • The yield on the US 10-year yield, was little changed at 3.43%.
  • Yields drifting lower after the latest ISM Manufacturing PMI showed a bigger than expected contraction in US factory activity, easing concerns about the need of more rate hikes.
  • The reading came in at 46.3 in March, the lowest since May of 2020, in a sign that tighter credit conditions are already hurting the economy.
  • Early in the week, a surprise cut in oil production by OPEC+ raised fears about further inflationary pressure and the need of more rate hikes. 


  • The Dow gained  327 TO 33,601
  • The Sp500 added 15 to 4,124
  • The Nasdaq  declined 32 to 12,189

  image: Trading economics


The US Dollar

  • The dollar traded near 102 on Tuesday after losing half a percent in the previous session.
    • The buck weighed down by weaker-than-expected US manufacturing data which pointed to further signs of a slowing economy.
    • The data also countered bullish bets following a surprise cut in oil production by OPEC+ that stoked fears of further inflationary pressures and the need for more interest rate hikes.
      • St. Louis Fed Bank President James Bullard said OPEC+’s decision to cut output was unexpected and an increase in oil prices could make the Fed’s job of lowering inflation more challenging.
    • Investors now look ahead to more economic releases in the US this week, including ISM Services PMI, JOLTS, ADP employment and the highly-anticipated NFP.  Fx NEWS

Asian markets following wall street higher and receiving another boost after the RBA decided to hold rates steady at its April meeting, citing the lagging effects of monetary policy.

  • In Japan, the Nikkei 225 rose 0.35% to close at 28,287 rising for the third straight session.
    • Gains were capped as investors continued to assess the impact of a surprise production cut from OPEC+ on inflation and monetary policy.
    • The surprise announcement by the group of major oil producers stoked fears that the US Federal Reserve may need to tighten policy further to keep inflation under control.
  • In Australia, the ASX 200 Index edged up 0.18% to close at 7,236 on Tuesday, hovering near its highest levels in over three weeks after the Reserve Bank of Australia paused its rate-hiking campaign.
    • The Bank citing it wanted additional time to assess the impact of past increases on the economic outlook.
    • The RBA kept the cash rate unchanged at 3.6% at its April 2023 policy meeting after raising interest rates for ten consecutive sessions.
    • Investors also continued to assess the impact of a surprise production cut from OPEC+ on inflation and monetary policy, amid concerns that the Federal Reserve may need to raise interest rates further to keep inflation under control. 

Crude oil

  • WTI crude futures held above $80/bl on Tuesday after surging more than 6% in the previous session.
    • Prices underpinned by a surprise production cut of more than 1 million barrels per day from OPEC+.
      • This accelerated short-covering in the market as traders have been reducing short positions in oil even before the surprise announcement.
    • Investors also remain optimistic about the outlook for Chinese demand, as the country’s economic recovery is expected to help cushion the impact of slower global growth.
    • Meanwhile, market watchers are gauging the effect of the latest output cuts on Federal Reserve monetary policy, amid concerns that the central bank may need to tighten policy further to keep inflation under control.  Gulf energy news


  • Bullion steadied around $1,980 /oz on Tuesday as investors continued to assess the outlook for Federal Reserve monetary policy in light of weaker-than-expected US manufacturing data and a surprise production cut from OPEC+.
    • The metal tumbled early on Monday as the surprise announcement from OPEC+ stoked fears of further inflationary pressures and the need for more interest rate hikes.
    • However, gold prices recovered later in the session after data showed that US manufacturing activity contracted for the fifth consecutive month in March and by the most since May 2020.
    • Investors now look ahead to a raft of employment data in the US this week, as well as interest rate decisions from the central banks of India, Australia and New Zealand. Kitco metals

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