View this email in your browser

Morning NOTE

5 October 2022


The ZAR continued to strengthen on the back of  improved global risk sentiment after US stocks continued to power ahead.

The ZAR continued to strengthen on the back of  improved global risk sentiment after US stocks continued to power ahead.

  • The Rand gained to 17.5600 on the back of improved risk sentiment and also a retreating Dollar.
    • The US dollar, falling on the back of weaker than expected US economic data.
    • Many now suggesting the FED might be forced to change course sooner rather than later.
    • The Buck falling to 110.38 on the index level, after stocks in New York powered ahead.
  • The RBA’s rate decision ( to only hike 25bps) continues to hover, with an expectation that the Fed could do something similar by hiking in smaller increments.
    • This would likely result in a fall in the Dollar.
    • However, we still await Friday’s NFP report as well as next week’s US CPI.
  • NB: The ZAR continued its gains even after more disastrous news from ESKOM that SA will remain in stage 4 loadshedding.
  • Once again indicating the power of Fed rate hikes and the mere perception of a change in policy direction.

Significant Market Data






  • The ZAR continued on its recent gains path, on the back of a  weaker US Dollar.
    • The Buck giving back large gains on the hint of a FED slowdown in rate policy.
    • Traders continued to reverse Dollar long bets after the RBA’s surprised markets with a lower than expected hike.
    • The  Rand benefitting and registering gains of more than 2.5% in the last 2 sessions on the back of a reversing Dollar.
    • This morning we opening at 17.6500 ( at the time of writing).
      • It would not be unusual for importers to take advantage of these price gains , as the local unit have gained more than, 50 cents in just over 2 sessions.
  • At the open, expect a pull back as importers take advantage of “better” levels,
    •  but in the short term USDZAR will trade under a SELL ON RALLY THEME,
  • Sentiment will continue to come from US markets and the performance of the US equities.
  • The drop in US and UK yields remain Risk supportive and against this backdrop we expect more ZAR gains.
  • We expect more ZAR gains if this theme continues , but traders acutely aware of important data releases later in the week as well as more FED governor speeches.

Expected Ranges

  • USDZAR :  Expect a range 17.4500-17.8200
    • Importers 17.5700-17.4500
    • Exporters 17.7000-17.8200
  • EURZAR :  Expect a range of 17.4900-17.7400
    • Importers 17.5500-17.4900
    • Exporters 17.6500-17.7400 
  • GBPZAR :  Expect a range of 19.9900-20.4000
    • Importers 20.1000-19.9900
    • Exporters  20.2500-20.4000


  • USDZAR 17.6600
  • EURZAR 17.6100
  • GBPZAR 20.2000


  • Eskom announced that STAGE 4 will be indefinite.
    • The power utility said this stage of load shedding will be maintained until further notice and will only issue a full statement on Wednesday afternoon.
    • This after a generation unit each at Kendal and Lethabo power stations tripped.
    • It said it would only issue a full statement on Wednesday afternoon. EWN
  • The South African Tourism board said, the sector is devastated by the fatal shooting of a German tourist in Mpumalanga on Monday.
    • The Department of Tourism confirmed on Tuesday that the tourist was part of a group of 4 travelling to one of the country’s top tourist attractions in the province. Moneyweb
  • Anglo American has teamed up with EDF Renewables to create a new company called Envusa Energy.
    • The company, which will begin by launching a 600MW wind and solar project in its first phase.
    • Anglo stated it eventually hopes to develop a regional renewable energy ecosystem here in South Africa.
    • It is another move by a large corporate to end its reliance on ESKOM.  Businessday


  • On Tuesday, the Dow gained 2.8%, the S&P 500 jumped 3.06% and the tech-heavy Nasdaq Composite rallied 3.34%.
    • The resulting moves allowed for US stocks to post their best 2 day performance in more than 2 years.
    • Analysts citing the weaker than expected data coming through indicating the Fed’s hikes might be talking a toll on the economy .
    • Earlier in the week data showed an increase in the amount of job openings as well as Monday PMI data still in the back of trader minds.
  • This morning, however on the back of some profit taking, stock futures are opening lower in Asian trading.
    • Futures contracts tied to the three major indexes were all down about 0.2%.
    • Equities also got a boost from a sharp retreat in the dollar and lower Treasury yields.
    • Investors now look ahead to more economic to better assess the US economy and guide the rates outlook. Bloomberg


  • US 10 Year Note Bond Yield was 3.63 percent on Wednesday October 5, according to over-the-counter interbank yield quotes for this government bond maturity.
    • US yields continue to drift lower on the back of weaker than expected economic data.
    • The drop in economic activity a sign that the Fed’s monetary might be slowing down the economy.
    • Traders betting that the FED would have to change course and slow down the pace of hikes.
  • In Britain, the 10YT yield continued to drift lower falling to 3.80% after reaching 4.5% last week.
    • Traders citing the government’s decision to backtrack on scrapping its tax proposals.
    • Also, a better-than-expected final reading for second-quarter GDP growth calmed investors about the country’s technical recession.
    • Last week, the BoE sought to calm markets by announcing it would purchase long-dated government bonds until 14 October to curb soaring yields.  CNBC


  • The Dow gained 825 to 30,316
  • The SP500 added 112 to 3,790
  • The Nasdaq  gained 360 to 11,176


  • Asian markets all higher after tracking a strong performance on wall street.
    • In Japan, the Nikkei 225 gained 0.3% to trade above 27,000, rising for the third straight session and taking cues from a strong lead on Wall Street .
      • The weak US economic data and Australia’s smaller-than-expected rate hike stirred hopes that the FED will consider a slower pace of monetary tightening.
        • On the domestic front, PM Fumio Kishida asked firms on Tuesday to keep pay hikes on pace with rising inflation.
      • However, geopolitical risks kept markets on alert after North Korea fired a ballistic missile over Japan on Tuesday for the first time in five years.
  • In Australia the ASX 200 gained more than 1% to close at 6,750, extending the biggest rally in two years .
    • The moves after the RBA surprised markets with a smaller-than-expected interest rate hike.
    • Strong gains on Wall Street also boosted local shares on hopes that softer US economic data would temper the Fed’s  aggressive tightening stance.
    • Technology stocks led the charge, while financial shares also advanced, with the “Big Four” banks all gaining at least 2%. Reuters
  • The US dollar weakened below the 111 mark, a level not seen in almost two weeks.
    • The index at 110.38, on speculation that weaker-than-expected US economic data would temper the Federal Reserve’s aggressive tightening.
    • The number of job openings in the US fell more than expected in August, signalling that tighter financial conditions could be cooling the job market.
      • This data came a day after a gauge of US manufacturing from ISM showed activity declined to the lowest since May 2020.
    • The decline against a backdrop of continued hawkish fed statements, ahead of this weeks NFP report nd next week’s CPI report. Source : FX news
  • The British pound strengthened to $1.14 to start Q4, back to levels not seen in almost two weeks.
    • Cable rallying after new FM Kwarteng said the government would not cut the top 45% rate of income tax for the biggest earners, reversing earlier pledge.
    • The pound hit a record $1.03 on September 26th after the government announced on September 23rd a mini-budget worth £45 billion by 2026-27 that included several tax cuts.
    • The news making investors worry about the sustainability of the UK’s debt levels.
    • Still, the pound is set to remain under heavy selling pressure through the last quarter of 2022, as the British economy is expected to fall into recession while the Fed is set to continue to raise rates sharply, sending the dollar up. Source: Poundsterlinglive
  • Crude oil prices rose on he back of a falling Dollar. US crude (WTI ) above $85/bl.
    • Prices  rallying almost 9% in the previous two sessions, as investors braced for an OPEC+ meeting where it is expected to announce a large supply cut to support oil prices.
      • The cartel is set to meet in Vienna on Wednesday and is reportedly considering reducing output by as much as 2 million barrels per day.
      • This would be double the volume previously flagged and would be the biggest production cut since the height of Covid-19 lockdowns.
      • The looming EU ban on Russian crude set and a US-led plan to impose a price cap on Russian oil also clouded the outlook.
      • This as President Vladimir Putin threatened to respond by withholding supply. All of the supply constraints raising prices. Gulf Energy news
  • Gold rallied on the back of a falling Dollar. The Yellow metal firmly above $1700/oz , the highest in 3 weeks.
    • Investors hoped that the Fed could adopt a less aggressive path to rate hikes amid a deteriorating outlook for growth.
    • The number of open jobs in the US economy dropped the most in nearly 2-1/2 years in August, while layoffs rose slightly, in the latest sign that the labor market is starting to cool.
    • This data came a day after a gauge of US manufacturing from ISM showed activity declined to the lowest since May 2020.
    • The market movement came in tandem with easing Treasury yields and a weaker dollar, which, in turn, lent further optimism to gold bulls. Kitco metals

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.