Morning NOTE

Summary :
 

• The ZAR continues to traded stronger at the start of 2023, following a tumultuous ending to 2022.
  • In December of 2022, the local unit traded in extreme ranges(17.9500-16.8800),
    • Mostly on the back of President Ramaphosa’s impeachment vote as well as the ANC leadership conference.
    • Both decisions ended in favour of Ramaphosa and markets reacted positively to this news, resulting in more ZAR gains.
       
• Supporting the local unit further were a reversal in US inflation as CPI and other inflationary metrics continued to indicate inflation might have peaked in the world’s largest economy.
  • This would also affect the way forward as it impacts the Fed’s monetary policy for 2023.
  • Fed speakers continued to be hawkish, but the data shows a slowdown has begun and we might have seen “ peak inflation”;
    • especially as Crude oil continues to trade around $80/bl.
       
  • Markets however remain undecided with news out of China affecting the Risk trade as the SP500  continued to trade around 3825 (below the key 4000 level) .
    • News of a Covid-19 induced slowdown likely to affect aggressive risk taking at the start of the year.
    • As well as key data this week likely to slowdown a RISK RALLY.

• Also on the data front we have
  • 21H00 : Now all eyes turn to the Fed’s FOMC minutes on Wednesday
  • 15H30 : the nonfarm payroll report on Friday,
    • Both likely to have clues about the next move in interest rates.
       
• Technically, the ZAR approaching key support at 16.8800, which will open up a move towards 16.4000.
  • Weakness above R17/$ are attractive areas for exporters to hedge and SELL USDZAR also coupling pairs like EURZAR and GBPZAR.

 
Opening rates
USDZAR 16.9400
EURZAR 17.9200
GBPZAR 20.3100