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Morning NOTE

4 July 2023


The ZAR strengthening on the back of weaker than expected US PMI data as well as a surprise “hold” by the RBA.


The Rand strengthening in early trading after the Reserve Bank of Australia surprised markets by keeping the cash rate at 4.10%.

  • The local unit opening on the front foot testing stops below the R18.7000/$ level.
    • Markets were expecting a 25 bps hike following earlier comments that inflation remains a concern.
    • The decision once again creating enormous uncertainty in both the Rates and FX markets.
    • The RBA board said it needed more time to assess the impact of past hikes.
    • That said, inflation in Australia was still too high, at 7.0% in Q1 of 2023, and would remain so for some time yet.
    • The central bank indicated that some further monetary tightening may be required to ensure inflation returns to the target range of between 2 to 3% in a reasonable timeframe.
    • The central bank also kept unchanged the interest rate on Exchange Settlement balances at 4.0%. source: Reserve Bank of Australia
  • In addition, yesterday’s US PMI manufacturing data below market expectations allowing for a slowdown in the Dollar’s advance.
  • For now, markets keeping a keen eye on Friday’s NFP report as well as Fed minutes on Wednesday.
  • The US celebrating their 4 July (independence day) holiday today, so expect low liquidity and a range bound session.

Data This weeksd

  • **US holiday – July 4th.






  • 14H30 : US NON FARM PAYROLLS expected +225K VS +339K PREVIOUS

Market Movement Today:

  • The Rand maintained its gains following a stronger session on Monday.
    • The ZAR briefly trading under the 18.7000 level during the opening salvo.
  • Weaker US ISM manufacturing data supporting the Risk asset complex.
    • However, markets likely to trade in a narrow range due to the US independence day holiday.
    • In addition, the FED minutes on Wednesday and Friday’s jobs report expected to drive directional bias.
  • Earlier this morning, the Reserve Bank of Australia, surprised the market by holding rates at 4.1%
    • After last month’s surprise hike traders priced in a 25 hike.
    • Risk assets like the ZAR benefitting from the move.
  • In the absence of US data, the ZAR likely to hold onto early session gains.
  • Trade : BUY USDZAR on dips (i.e. SELL ZAR)

Markets this morning

  • USDZAR 18.7000
  • DOLLAR 102.99
  • EURUSD 1.0910
  • SP500 4,450
  • GOLD 1925
  • US10YT 3.84%

Expected Ranges:

  • USDZAR : Expect a range 18.5600-18.8900
    • Importers : 18.6700-18.5600
    • Exporters : 18.7800-18.8900
  • EURZAR : Expect a range of 20.2400-20.6300
    • Importers : 20.3700-20.2400
    • Exporters : 20.5000-20.6300
  • GBPZAR : Expect a range of 23.6000-23.9600
    • Importers : 23.7200-23.6000
    • Exporters : 23.8400-23.96000


  • USDZAR : 18.7000
  • EURZAR : 20.4000
  • GBPZAR : 23.7800


Opposition parties unite

  • DA leader John Steenhuisen is expected to provide details on a united opposition pact designed to unseat the ANC and keep the EFF out of power.
  • 7 opposition parties on Monday announced that they now reached enough common ground over the course of several meetings to hold a national convention.
  • Steenhuisen announced his moonshot pact ideal when he was re-elected as party leader in April. Source : EWN

SAA flying to Brazil

  • SAA launching Cape Town and Johannesburg routes to Brazil
  • It will be the airline’s first long-haul route since it returned to the skies in 2021.
  • SOE, SAA has finally officially confirmed its first intercontinental connections since the Covid lockdowns and its business rescue.
  • The company announcing on Thursday that it is launching two direct routes – from both Cape Town and Johannesburg – to Brazil’s financial hub of São Paulo in October and November.
  • SAA, which is on the verge of being taken over by the Takatso Consortium (majority shareholders, but the government will still own a sizeable stake), said flight ticket sales have already commenced. Source : Moneyweb

SA consumers

  • SA consumers on both extremes of the income scale are the most affected by the rapid rise in living expenses with pressure exacerbated by unprecedented levels of Eskom’s power cuts.
  • This is according to the latest Consumer Default Index (CDI) figures that track the marginal default rate for credit card, home, vehicle, personal and retail loan portfolios.
  • According to Experian, the default rate for accounts that have never before defaulted soared to approximately 22% in the first quarter of 2023 compared to a year before.
  • Defaults were highest for the home loan (35%), retail loan (30%) and personal loan (27%) portfolios over a 12-month period. Source : Moneyweb


Equities trading sideways with no directional conviction on the US holiday.

  • US stocks closed with marginal gains on a shortened Monday session.
    • Markets continued to assess the economy’s resilience to further monetary tightening from the Federal Reserve.
    • The Dow added 10 points, while the S&P 500 and the Nasdaq edged 0.1% and 0.2% higher, respectively.
  • Shares from rate-sensitive sectors edged lower after ISM PMI data showed that US manufacturing contracted more than expected for an eighth consecutive month in June.
    • The weaker than expected PMI’S reigniting concerns that restrictive borrowing costs will hamper economic activity to a large extent.

Yields flat lining ahead of the Us holiday.

  • The yield on the US 10-year Treasury note cut early gains to around 3.85% on the first trading day H2.
    • The rise in yields stalling amid concerns about the health of the economy, after the ISM Manufacturing PMI pointed to the biggest contraction in factory activity in nearly three years.
    • Meanwhile, minutes from the latest FOMC meeting on Wednesday will be keenly watched for further clues on the Fed’s next steps,
      • with Chair Powell reinforcing last week that interest rates will continue to rise this year.
  • Traders are currently assigning a nearly 87% chance the Fed will raise the fed funds rate by 25bps next month and the odds for another quarter-point hike in September fell to 18% from 21% before the ISM release.
    • Markets will close early Monday and be closed Tuesday for the Independence Day holiday.  Source : Reuters


  • DOW  +10 to 34,418
  • SP500 +5 to 4,455
  • NASDAQ +28 to 13,816

image: Trading economics


Asian markets
Eastern markets mixed with not real directional conviction ahead of the US holiday

  • In Japan, the Nikkei 225 Index fell 0.98% to close at 33,422, with both benchmarks retreating slightly from 33-year highs as investors took some profits off the table while awaiting fresh market catalysts.
    • On Monday, investors digested data showing business sentiment in Japan improved in the second quarter, while manufacturing activity contracted in June.
  • In China, the Shanghai Composite inched up 0.04% to close at 3,245, with mainland stocks struggling to gain momentum as investors cautiously awaited fresh market catalysts.
    • A private survey showed that Chinese manufacturing activity slowed in June but remained expansionary, compared to government data pointing to a third straight month of contraction in the sector.
    • Markets also awaiting Wednesday’s FOMC minutes and Friday’s US jobs report. Source : Trading economics

Oil prices higher after  Saudi Arabia and Russia announced a fresh reduction in oil supplies.

  • US WTI crude futures steadied around $70/bl on Tuesday as traders weighed reports of additional output cuts by top exporters Saudi Arabia and Russia for August against signs of slowing global growth and weakening demand.
  • On Monday, Saudi Arabia announced that it would extend its voluntary cut of 1 million barrels per day to August, while Deputy Prime Minister Alexander Novak said Russia will reduce its oil exports by 500,000 bpd next month.
  • That would bring the total amount of output cuts by OPEC+ members to 5.16 million bpd as the group of major producers aimed to bolster prices.
  • Meanwhile, a raft of private survey data in major economies pointed to sluggish demand, with US manufacturing falling the most in nearly three years.
  • Factory activity in the Euro area also contracted more than expected, while Chinese manufacturing slowed.
  • Further supporting prices are the US commitment to replenish the Strategic Reserve stockpiles. Source : Gulf News

Gold prices climbs as U.S. manufacturing sector disappoints in June.

  • Gold prices higher to trade above the $1,920/oz on Tuesday as investors awaited the US Federal Reserve’s June policy meeting minutes due this week for more clues on the path for interest rates.
  • Latest data showed that US manufacturing contracted further in June to the lowest reading in nearly three years.
  • Data released Friday also showed that US inflation slowed and consumer spending decelerated sharply in May.
  • Still, Fed Chair Jerome Powell indicated last week that further rate increases are likely ahead as it will take time to bring inflation back down to the 2% target.
  • Markets are priced for a nearly 90% chance that the central bank will hike rates by 25 basis points in its July meeting. Source KITCO

Forex markets trading in narrow ranges on the back of the US holiday.

  • The US dollar index was little changed around 103 on Tuesday, as investors weigh updates on the US economic performance and prospects the Fed will continue to tighten.
  • The ISM Manufacturing PMI pointed to the sharpest contraction in factory activity since May 2020 while consumer spending released last week showed a big slowdown.
  • The payrolls report, and  minutes from the latest FOMC meeting due Wednesday will be keenly watched for further clues on the Fed’s next steps.
  • Chair Powell reinforcing last week that interest rates will continue to rise this year. Source : FX street

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