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Morning NOTE

5 September 2022


The Rand lost nearly 15 cents in thin Asian trading on the back of the Euro falling sharply through parity as Europe’s gas crises worsens.


  • The Rand suffered a steep overnight fall to 17.4000 after EURUSD traded as low at 0.9877

  • The Rampant Dollar advancing with the index hitting 110.11 and in turn reaching the highest since June 2002.
    • The local unit once again at the whims of international capital flows, even after Friday’s NFP supporting risk assets across the globe.
    • The story this morning for the Euro’s demise, is Russia INDEFINTELY SHUTTING DOWN A GAS PIPELINE TO EUROPE?
      • Safe haven buying immediately kicked off, resulting in a boost for the Dollar and Gold at the expense of Risk (EMFX like the ZAR).
    • Last week SA showed strong private sector credit and money supply growth, coupled with a +R24bn trade surplus.
      • This would all be ZAR supportive under normal trading conditions, but the local unit not getting the benefit of the doubt and price action driven by exogenous factors.
    • Friday’s NFP (Non-Farm Payrolls) coming in line with expectations at 315k , with the Fed now set for a 75 bps hike in September.

Significant Market Data


  • 11h30 : SA GDP Q2 :  -0.5% expected QoQ vs +1.9% previous
  • 11h30 : SA GDP Q2 +1% expected QoQ vs +3% previous






  • This morning after the 15 cents drop in Asia, due to the drop in the Euro, expect some early profit-taking in USDZAR.
    • Exporters likely to step in and take advantage of attractive levels, and we could push towards the Asian session low of 17.2500.
    • This would however allow for short term importers to exact a degree of covering.
  • The ZAR however remains on the back foot and as mentioned the FED remains a risk.
    • Tomorrows SA GDP likely to be supportive if it prints better than expected.
    • The US jobs report, confirming 75 bps for September.
  • NB: although SA data have been ZAR supportive of late i.e. Unemployment , Money Supply and dare I say higher inflation,
    • As this would ensure action from the SARB as the theme remains the FED.
    • This will continue to drive future price action. 
      • ZAR Bulls, with the ZAR stretched any positive moves could lead to real gains on a snap back in USDZAR.
      • BUT : This will ONLY come from the FED.

Expected Ranges

  • USDZAR :  Expect a range 17.2500-17.5500
    • Importers 17.3300-17.2500
    • Exporters 17.4200-17.5500
  • EURZAR :  Expect a range of 17.0800-17.3500
    • Importers 17.1300-17.0800
    • Exporters 17.2400-17.3500
  • GBPZAR :  Expect a range of 19.7800-20.0700
    • Importers 19.8600-19.7800
    • Exporters  19.9900-20.0700


  • USDZAR 17.3900
  • EURZAR 17.2000
  • GBPZAR 19.9100


  • Huge petrol price drop expected.
    • After months of unbearable price hikes, the Central Energy Fund’s latest data predicts that 95-octane petrol is expected to decrease by around R2.35c.
    • The Road Freight Association is one of several industries that have welcomed this week’s expected fuel price drop.
    • For Gauteng residents, this means you could pay at least R23 per litre at the pumps, compared to the current R25.42c a litre. EWN news
  • The President and his farm Phala-Phala once again the headlines with reports of the sale of 26 animals fetching R6.8 million at an auction.  
    • Recap: CR was accused by SA’s former spy chief Arthur Fraser of covering up the theft in 2020 of foreign exchange from the sale of animals at the Phala Phala Wildlife farm.
    • The money was said to be hidden inside furniture at the ranch, about two hours north of the capital, Pretoria. 
    • Ramaphosa has denied wrongdoing and said he’s cooperating with investigators. NEWS24
  • ESKOM and now Koeberg
    • Nuclear power station Koeberg’s problematic Unit 2 tripped on Saturday morning, less than a month after it was plagued by mechanical issues and a delayed return to service.
    • The SOE confirming the unit tripped from full power during a routine testing of the control rod.
  • Global chip shortages hit SA motor vehicle manufacturing .
    • The global shortage of semiconductor microchips, is likely to continue well into 2023, analysts say.
    • The shortage have seen SA motor companies struggle to meet market demand,
    • This despite frantic efforts by chip companies and governments to ease the crisis.
    • Researchers saying, world vehicle production has been cut by at least 2-million units so far this year. Businessday Live


  • US Markets are closed on Monday for the Labour Day holiday.
    • On Friday, the Dow Jones fell over 300 points while the S&P 500 and the Nasdaq dropped 1.1% and 1.3%, respectively.
      • Traders citing, the highly-anticipated jobs report failing to allay investors’ fears about Fed’s aggressive interest rate hikes.
        • The NFP report showed that the US economy added jobs in line with expectations in August.
        • Traders are still pricing in a 75bps rate hike in the fed funds rate this month.
        • All sectors closed in the red, except energy shares, boosted by higher prices of crude oil.
  • On the week, the Dow and S&P lost 3% and 3.3%, respectively, while the Nasdaq shed 4.2%, recording their third negative week in a row.


  • Yields globally continues to spike on the back of sticky and 4 decade high inflation.

    • In the US the 10YT traded at 3.20% at the time writing.
    • This week we have the RBA likely to hike rates again.
  • In addition, in the UK, where the cost of living are rapidly spiraling out of control, Britain’s 10-year Gilt yield surged to 2.96%.
    • The highest level since 2014 on expectations the BOE has no option other than continuing its aggressive tightening.
    • This implies, another back-to-back 50 bps hike in borrowing costs to control inflation even though the British economy is heading to a recession.
    • The annual inflation rate in the UK topped analyst estimates and hit a double-digit for the first time in 40 years in July.
  • Important : The new prime minister of the U.K. will be announced Monday.
    • Foreign Secretary Liz Truss is the front-runner, while former Finance Minister Rishi Sunak is expected to come second.


  • The Dow declined 337 to 31,318
  • The SP500 fell 42 to 3,924
  • The Nasdaq  lower by 154 to 11,630

Futures Trading:

  • image : Trading Economics


  • Asian markets trading mixed as traders digest Friday’s Jobs report as well as the Gazprom ramifications for financial markets.
    • In Japan, the Nikkei 225 fell 0.11% to 27,620 and in turn closing at its lowest levels in a month.
      • Traders saying the index tracking continued weakness on Wall Street. This after moderating US jobs growth failed to allay fears about further monetary tightening.
      • Investors also assessed data showing Japan’s service sector contracted in August for the first time since March as fresh Covid-19 outbreaks weighed on demand.
    • In Australia, the ASX 200 rose 0.34% to close at 6,852, after recovering slightly and helped by gains in energy and mining stocks.
      • This after a rebound in commodity prices. Energy stocks led the gains as oil prices climbed ahead of an OPEC+ meeting.
      • Investors are also preparing for the RBA ‘s (Reserve Bank of Australia) policy decision on Tuesday.
      • The RBA  is expected to deliver its fourth straight half percentage point rate hike to combat two-decade high inflation. Bloomberg
  • Brent prices spike above $94/bl after Russia’s Gazprom stopped flows to mainland Europe, citing maintenance issues.
    • The impact of the latest fallout from Europe’s worsening energy crisis supporting prices.
    • OPEC+ cuts also supporting prices as it tries to combat potential “new” supply from Iran.
    • However, demand concerns stopping a full out rally, due to anti-virus lockdowns in top importer China.
    • Monetary tightening remains a worry as central bankers warn they are ok for a recession if it can bring prices under control.
    • NB:  Brent prices declined nearly 8% last week and are down about 25% since mid-June amid fears that tightening monetary conditions.
  • Gold prices finding some support and even buying after Russian energy giant Gazprom PJSC halted its key gas pipeline to Germany.
    • This after, on Friday, G7 leaders agreed to impose a price cap on Russian oil. 
    • Bullion trading around $1,710/oz at the time of writing.
    • Also, traders reassessed the outlook for US interest rates following an “ in line “ jobs report.
      • NFP rising +315k but unemployment higher at 3.7%, supporting Gold as yields drifted lower.
    • Safe haven buying helping the yellow metal due to a deepening energy crisis in Europe that heightened recessionary risks.
  • US Dollar shrugged off weaker / inline jobs report and fading yields after Russia Gazprom’s decision to halt flows of crucially needed Natural Gas to Europe.
    • The dollar broke above 110 on Monday for the first time since June 2002.
    • Traders citing a flight to safety, after Russia indefinitely shut a key gas pipeline to Europe on Friday.
    • The Kremlin citing an oil leak in a turbine, notably only a few hours after G7 leaders agreed to impose a price cap on Russian oil.
    • However, moderating US jobs growth failed to stop fears about the FOMC ’s aggressive plan to stamp out inflation.
    • Markets continues to price for another 75 basis point rate increase this month.
  • Natural Gas crises

    • European natural gas futures jumped almost 30% to approach €280 per megawatt hour on Monday.
    • This after Russia’s Gazprom reversed its plan to resume flows through the Nord Stream pipeline and shut it indefinitely, citing maintenance requirements.
    • The Nord Stream pipeline was already running at just 20% of capacity before flows were halted last week for a three-day maintenance period.
    • Gazprom decision is set to deepen an ongoing energy crisis in Europe, with countries trying to find alternatives to Russian gas supply.
    • This included LNG alternatives i.e. liquefied natural gas from the US.
    • European Union ministers will have an emergency energy meeting this week to discuss the energy crisis and define special measures to fight rising costs. Reuters

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