The ZAR weakened on the back of stronger than expected US ISM Services data that showed Inflation remains a threat.
- The Rand weakened to 17.480 on the back of higher than expected US services data, that showed higher prices.
- This is a follow up on last week’s stronger than expected Jobs data as well as a rise in Average hourly wages in the world’s largest economy.
- The Fed continues to battle to bring down inflation and various Fed governors have voiced concerns about the “labour/wages/ services” component.
- They are usually more “sticky” to get down.
- Atlanta Fed president Raf Bostic continues to mention this in the various speeches he has given.
- The ISM Services PMI unexpectedly jumped to 56.5 in November from 54.4 in October which was the lowest reading since May of 2020, and beating market forecasts of 53.3.
- On the back of the data the 10YT yield spiked to 3.60% and the SP500 fell below 4,000 i.e. RISK OFF !!!
- Traders citing that although markets have priced in 50bps for December, there was an expectation that January meeting would be 25bps,
- However , bets have now increased that it will also be 50bps – hence the bearish sentiment and a recovery in the Dollar.
- The DXY trading higher at 105.47
Significant Market Data:
- 17h00 : US ISM NON-MANUFACTURING PMI’S FOR NOVEMBER +53.1 EXPECTED VS 54.4 PREVIOUS
- Actual was 56.5 vs 53.3 forecasted
- 17H00 : US FACTORY ORDERS FOR OCTOBER +0.7% EXPECTED VS +0.3%
- Factory orders also surprised to the topside with +1% vs +0.7% expected
- 11h30 : SA GDP GROWTH Q3 YOY +0.4% EXPECTED VS 0.2% PREVIOUS
- 12h00 : EU GDP GROWTH Q3 TOT +1.7% EXPECTED VS 2.7% PREVIOUS
- 11h00 : SA CURRENT ACCOUNT Q3 R-140BN EXPECTED VS -R87BN PREVIOUS
- 13H00: SA MANUFACTURING OCTOBER YOY -1.7% VS +2.9% PREVIOUS
- 15H30 : US PPI NOVEMBER YOY +7.2% EXPECTED VS 8% PREVIOUS
- 17H00 : US MICHIGAN CONSUMER SENTIMENT 57 EXPECTED VS 56.8 PREVIOUS
- The ZAR opened WEAKER on back of stronger than expected US ISM Data, that continues to point to elevated US inflationary conditions.
- US bond yields spiked and the Dollar rebounded.
- The ZAR trading at 17.4500 vs a strongest level of 17.1400 in late afternoon JHB trading on Tuesday.
- Markets remain nervous around the situation surrounding President Cyril Ramaphosa.
- It appears that he will survive any impeachment attempts as the ANC close ranks around their leader,
- and if so is likely to triumph at leadership conference later this month.
- AND ensure another term as president.
- Of course , the risk remains if some ANC NEC members decide to turn against him and agree on impeachment.
- This remains a large risk for ZAR gains.
- Longer term we do expect ZAR gains on the back of a “dovish” Fed, that indicated their willingness to slowdown rate hikes.
- The ZAR and other risk assets will benefit in this environment.
Today, given The rebound in the Dollar and rise in US yields, we expect a weaker ZAR.
This morning expect some stop hunting for a move lower before buying finding support., below the Asian low.
This will likely be good Dollar buying opportunities .
Trade : BUY USDZAR ON DIPS.
- USDZAR : Expect a range 17.2600-17.5900
- Importers 17.3700-17.2600
- Exporters 17.4800-17.5900
- EURZAR : Expect a range of 18.1700-18.4100
- Importers 18.2500-18.1700
- Exporters 18.3300-18.4100
- GBPZAR : Expect a range of 21.1200-21.3900
- Importers 21.2100-21.1200
- Exporters 21.3000-21.3900
- USDZAR 17.4500
- EURZAR 18.3000
- GBPZAR 21.2500
- Ramaphosa managed to win a crucial vote at the NEC debate to move the Phala Phala report to next week.
- Opposition parties say the ANC’s NEC’s decision to reject the Section 89 panel report won’t change their approach and vote for the establishment of an impeachment inquiry.
- Acting ANC, secretary-general Paul Mashatile told the media following Monday’s special NEC meeting that the party would vote to oppose the establishment of the inquiry.
- He addressed the media shortly before the party’s parliamentary caucus met where he communicated the decision to members.
- The EFF & DA have both called on the ANC MPs to vote in support of the establishment of an impeachment inquiry. EWN
- However the EFF looks to press ahead for force an impeachment inquiry.
- Their leader Malema, saying he believes it has the numbers to ensure MPs vote in favour of an impeachment committee which could see President Cyril Ramaphosa booted out of office.
- MPs at the National Assembly are set to debate the Phala Phala matter next week.
- This on the back of the release of a Section 89 panel report which found that the president may have breached the Constitution and broke anti-corruption laws. NEWS24
- Johannesburg weather
- Hailstones covered parts of Johannesburg in a white blanket as a thunderstorm swept across the city on Monday afternoon.
- Branches and leaves struck down by the hailstones were seen lying on many streets.
- The thundershower brought with it heavy rain, damaging winds and large amounts of hail.
- Large hailstones battered windows as the storm broke suddenly after midday. IOL
- US stock futures consolidated after the major sell off during Monday’s session.
- Traders citing better-than-expected US services activity data suggested the Federal Reserve could raise interest rates for longer.
- In regular trading on Monday, the Dow fell 1.4%, the S&P 500 dropped 1.79% and the Nasdaq tumbled 1.93%, with all 11 S&P sectors closing in negative territory.
- The November services activity data, along with the November jobs report released last week, pointed to a resilient economy.
- Still, the market is expecting the Fed to deliver a more moderate 50 basis point rate increase at its December meeting.
- Investors now look ahead to US trade data that could throw light on the state of the global economy, as well as more earnings reports from US firms.
- The yield on the US 10-year increased toward 3.6%, up from an over 10-week low of 3.5% hit on December 2nd,.
- The surprising improvement in the US services sector lifted expectations the Federal Reserve will keep its aggressive tightening to curb inflation.
- The ISM Services PMI unexpectedly jumped to 56.5 in November, rebounding from a more than 2-year low of 54.4 hit in October and beating market forecasts of 53.3.
- The report comes after last week wrapped up with stronger-than-expected jobs data.
- Last week the he US economy added a net 263k jobs during November, well above market forecasts of 200 thousand and showing further evidence that the jobs market remains tight.
- Earlier, Fed Chairman Powell said that it may be appropriate to slow the pace of interest rate increases as there are recent data points to a slowdown in the US economy.
- The Dow fell 482 to 33,947
- The SP500 fell 72 to 3998
- The Nasdaq fell 221 to 11,239
- Asian Markets were mixed on Tuesday following a selloff on Wall Street overnight as better-than-expected US services activity data stoked fears that the Fed could raise interest rate for longer.
- Australian shares also declined as the RBA raised its policy rate by 25 basis points to 3.1%, taking borrowing costs to a level not seen in a decade.
- In Japan, the Nikkei 225 rose 0.24% to close at 27,886, though gains were capped after better-than-expected US services activity data stoked worries that the Fed could raise interest rates for longer.
- Investors also reacted to data showing household spending in Japan rose the least in five months,
- while real wages fell to an over seven-year low as rising inflation outpaced modest growth in nominal wages.
- In China, the Shanghai index added 0.02% to close at 3,213,
- Markets higher as China continued to shift away from strict Covid restrictions.
- Beijing announced that it is joining other cities in removing testing requirements to enter public venues.
- Reuters reported that China could announce a further relaxation of Covid restrictions as early as Wednesday . REUTERS
- The US dollar held its recent advance to above 105 on Tuesday, supported by renewed concerns that the Federal Reserve will keep on raising interest rates following better-than-expected US services activity data.
- The November ISM Services data, along with the solid November jobs report released last week, pointed to a resilient economy and bolstered the case for further monetary tightening.
- Still, the market is expecting the Fed to deliver a more moderate 50 basis point rate hike at its December meeting following four straight 75 basis point increases
- BUT questions on how long the central bank will need to tighten remain.
- The dollar held recent gains against the euro, sterling and yen, while facing renewed pressure from the Aussie Dollar after the RBA raised interest rates further. FX NEWS
- US WTI crude oil rose above $77/bl on Tuesday, snapping a 2-day decline as easing Covid restrictions in China buoyed the demand outlook.
- Supply-side uncertainties triggered by fresh sanctions on Russian oil kept the market on edge.
- China easing restrictions as major cities scrapped testing requirements that have hindered movement in the world’s top crude importer.
- The shift in China’s Covid response was among several factors considered in OPEC+’s decision to maintain its current output policy.
- Traders concerned after the higher than expected ISM data signalling the FED will need to tighten for longer. GULF ENERGY NEWS
- Gold held its recent decline to around $1,770/oz.
- Bullion under pressure following stronger than expected US ISM services data and a spike in US yields and the US Dollar.
- Still, the market is expecting the Fed to deliver a more moderate 50 basis point rate hike at its December meeting following four straight 75 basis point increases,
- questions remain on how long the central bank will need to tighten remain.
- Higher interest rates dampen gold’s appeal to investors as they raise the opportunity cost of holding non-yielding bullion. KITCO METALS REPORT