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Morning NOTE

6 April 2023


The ZAR weakened on the back of a weaker Risk Complex, following the lower than expected US ISM data.


The Rand weakened to 18.0500 in late Wednesday trading after the release of the US ISM Service sector data.

  • The weaker than expected data indicating that the possible slowdown in manufacturing has now slipped over into the services sector.
  • The result a  drop in the SP500 as investors continued to book profits ahead of Friday’s  Jobs report and the Easter long weekend.
  • The ISM Services PMI fell to 51.2 in March of 2023 from 55.1 in February and well below forecasts of 54.5.
    • The reading pointed to the slowest growth in the services sector in three months,
      • as demand and employment cooled while capacity and logistics improved and price pressures eased to the lowest since September 2020. 
    • Fed governors, have continued to reference the ISM services sector as an inflationary headwind, and its slowdown could be significant in its policy stance for more rate hikes.
    • Markets are now pricing Zero rate hikes in the next meeting with the possibility of cuts in H2 of 2023.
  • This would likely cause investors to switch into risk assets at the expense of the Dollar resulting in a Sharp Risk rally for the remainder of the year.
    • The ZAR like other high yielding EMFX the beneficiaries as well as equities and bonds ( yields likely to drop).
    • In addition, the recent growth in the Fed’s balance sheet of $400bn indicating monetary authorities to step in in the event of any bank crises.


  • More QE + lower rates = POSTIVE FOR RISK .

Data this week





Market Movement Today:

  • The Rand weakened on the back of a weaker risk environment following poor US data.
    • In addition, we have the release of the US payrolls report on Friday.
      • The payrolls have become a headache for traders across the globe, after the January surprise or more than 500k
      • Recall the ZAR weakened from 16.9300 to 18.7000 as rate hike fears gripped financial markets.
  • Thus, with this in mind we have seen Dollar buying ahead of subsequent payrolls releases,
    • In addition,  this is exacerbated by the Good Friday holiday tomorrow and the drop in liquidity.
  • The Dollar remains under pressure across the board with the Buck below 102,
    • Following the drop in the US10YT yield to 3.29%
    • US yields continue to fall on the back of weaker US economic data,
    • With markets now pricing ZERO HIKES at the next Fed meeting.
  • Long ZAR traders booking profits resulting in a weaker ZAR.

We maintain

  • Risk assets likely to remain supported in this environment, especially after the FED resumed QE to support ailing banks.
  • The ZAR will ultimately benefit from this.
  • Trade : SELL USDZAR on Rallies.
  • Buy : 17.9000
  • Sell : 18.20000

Expected Ranges:

  • USDZAR : Expect a range 18.0000-18.12000
    • Importers : 18.0400-18.0000
    • Exporters : 18.0800-18.1200
  • EURZAR : Expect a range of 19.6200-19.7700
    • Importers : 19.6700-19.6200
    • Exporters : 19.7200-19.7700
  • GBPZAR : Expect a range of 22.3900-20.6000
    • Importers : 22.4600-22.3900
    • Exporters : 22.5300-20.6000


  • USDZAR : 18.0500
  • EURZAR : 19.6800
  • GBPZAR : 22.4900


  • SA’s  government withdrew a state of disaster imposed two months ago to deal with the nation’s energy crisis after civil-rights groups filed lawsuits challenging the move. 
    • President Cyril Ramaphosa announced the state of disaster Feb. 10 to help deal with power outages that have been imposed by the nation’s beleaguered state electricity utility Eskom Holdings SOC Ltd. 
    • The measure enabled the government to bypass regulatory hurdles as it sought to repair broken power plants and procure emergency electricity to end blackouts that have extended to as long as 12 hours a day. Bloomberg
  • The South African Federation of Trade Unions (Saftu) welcomed the withdrawal of the exemption that was granted to Eskom to not disclose its irregular and wasteful expenditure.
    • Last week, Minister of Finance Enoch Godongwana signed a government gazette that would see the embattled utility being exempted from disclosing irregularities in its annual financial statements.
    • The gazette received criticism from several organisations and political parties, saying the exemption was an attempt to conceal corruption at the utility.
    • On Wednesday, Godongwana announced in Parliament that the exemption was temporarily withdrawn. EWN
  • Frankfort in the Free State has been experiencing less frequent load shedding thanks to an independent power producer in the area, Rural Maintenance.
    • The company has been managing power distribution in the town for over a decade and was contracted by the Mafude Local Municipality.
    • Through purchasing electricity from four local solar farms at a more affordable rate than Eskom, Rural Maintenace distributes power across the Mafube Municipality.
    • Eskom has now threatened to block the company from reducing load-shedding schedules, MyBroadBand reported.
    • Rural Maintenace, as well as the Mafube municipality’s business forum, is set to meet with Eskom and its representatives in the Johannesburg High Court today. Moneyweb


  • US markets traded mixed with the Dow rallying and the SP500 declining.
    • This morning, US equity futures fell with Asian stocks and government bonds rallied against the backdrop of weaker-than-expected economic data that supported forecasts for recession.
    • Contracts for US shares fell after the S&P 500 retreated 0.3% Wednesday as selling pressure clustered in vulnerable corners of the market.
    • The Nasdaq 100 dropped 1%, eroding a stellar first quarter in which the tech-heavy index rose by fifth. Reuters


  • The 10-year US Treasury note yield, seen as a proxy for borrowing costs worldwide, eased to below 3.3%.
    • It was the lowest level since September 2022 as recent data raised concerns about the health of the US economy boosting the likelihood the Federal Reserve will end its rate-hike cycle.
    • US private sector added fewer jobs than expected in March, according to ADP offering more evidence that the labour market is cooling.
      • At the same time, the ISM Services PMI fell to 51.2, well below forecasts of 54.5, and pointing to the slowest growth in the services sector in three months.
      • As a result, money markets are now pricing in an over 60% chance that the Federal Reserve will hold rates steady in May. CNBC


  • The Dow added 80 to 33,482
  • The SP500 declined 10 to 4,090
  • The Nasdaq declined 129 to 11,996

  image: Trading economics


The US Dollar

  • The US dollar declined after the weaker than expected US ISM Services data.
    • Traders now braced for US non-farm payrolls data Friday.
      • Meantime, Cleveland Fed President Loretta Mester said this week that interest rates in the US will keep rising despite weakness in the economy.
    • She also suggested that rates will remain above the 5% mark for longer.
      • Money markets are now pricing a pause in interest rate hikes in May, with rate cuts expected soon in July through the end of the year.
      • The dollar index slid to a two-month low earlier this week after the ADP report showed private companies in the US added fewer jobs than expected in March.
      • Also, job openings fell below 10 million for the first time since 2021,
        • while factory orders declined further and the ISM Manufacturing PMI indicated that factory activity dropped for a fifth month. Fx news

Asian markets mixed as investors jockey for position ahead of Friday’s NFP report.

  • Earlier US ISM data printed lower,  indicating more headwinds for the world’s largest economy
  • In Japan, the Nikkei 225 fell 1.68% to close at 27,813, retreating from three-week highs and tracking losses on Wall Street overnight.
    • Earlier US ISM showed more weakening US data pointed to further signs of a slowing economy.
      • Investors also reacted to data showing Japan’s services PMI was revised higher in March amid a sustained recovery in the sector.
      • Commodity-linked stocks led the market lower, with sharp losses from Nippon Steel (-3%).
      • Other index heavyweights also declined, including Mitsubishi UFJ (-2.6%).
  • In Australia, the ASX 200 rose 1.2 points or less than 0.1% to d 7,237.2 in morning deals on Thursday.
    • The index trying to extend gains for the nine straight sessions while staying at its highest levels in over three weeks.
    • In addition, investors digested a statement from the RBA’s Governor Philip Lowe Wednesday that the central bank’s recent decision to hold rates steady does not imply that tightening path is over.
      • The central bank kept the cash rate unchanged at 3.6% Tuesday after raising rates for ten consecutive periods, as policymakers account for policy lags.
    • In the US, Wall Street closed mainly lower Wednesday, with a batch of data fuelling worries that restrictive central bank policies could push the global economy into recession. Reuters

Crude oil

  • Brent crude futures hovered below $85/bl on Thursday as weak US economic data prompted fears of cooling oil demand and offset earlier gains this week from OPEC+ plans to cut more production.
    • The US services sector slowed more than expected in March while the private sector added far fewer jobs than expected in March, while job vacancies sank in February to the lowest since May 2021.
      • Earlier this week, prices surged over 6% after major oil producers and allies including Russia pledged voluntary production starting from May.
    • Meantime, government data showed US crude stockpiles dropped 3.7 million barrels last week, about 1.5 million barrels more than consensus.
      • Gasoline and distillate stocks also dropped more than estimated, down by 4.1 million barrels and 3.6 million barrels, each.
      • In other oil news, Saudi Arabia has lifted the prices of its flagship crude for Asian buyers for the third month running. Gulf Energy News


  • Gold prices fell 0.46% to $2,011/oz  on Thursday, easing from near its highest levels in a year amid a firm US dollar ahead of Friday’s non-farm payroll data for March.
    • Traders looking for clarity on the Federal Reserve’s next move on its monetary tightening path.
    • Meantime, Cleveland Fed President Loretta Mester said this week that interest rates in the US will keep rising despite weakness in the economy.
    • She also suggested that rates will remain above the 5% mark for longer. Kitco metals

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