The ZAR weakened nearly 3 % on the back of a resurgent Dollar, following the stronger than expected US Jobs report.
The Rand weakened sharply to reach a weakest level of 17.5100 vs the US Dollar following a mind blowing US Jobs report.
- Across the board the Dollar rallied as risk assets once again retreated.
- The Data suggesting the US economy’s labour remains resilient in spite of a rampant Fed.
- Traders unwinding Dollar short bets and switching to the opinion that the FED has more room to raise rates as it combats inflation.
- The US economy unexpectedly created 517K jobs in January of 2023.
- It was the most since July, easily beating market forecasts of 185K.
- Job growth was widespread in January, led by gains in leisure and hospitality (+128K), professional and business services (+82k) .
- In addition, the unemployment rate in the US declined to 3.4 percent in January 2023.
- It was the lowest level since May 1969 and below market expectations of 3.6 percent, as the number of unemployed people declined by 28 thousand to 5.69 million
- Yields on the US 10YT spiked to 3.55% vs 3.33% before the jobs report.
- Traders concerned the Fed has room to move, and could likely target the terminal rate above 5%.
- However, Powell noted in the presser following last week’s FOMC, that the DISINFLAIONARY PROCESS HAD STARTED.
- It therefor turns our attention to his speech tomorrow night at the Economic club of Washington.
- This Monday morning, Markets also adopting a RISK OFF tone, following geo-political tensions between CHINA and the USA.
- The USA announcing it had shot down a spy balloon of Chinese origin over its mainland after it was spotted above both North and South Carolina.
- China denies the balloon was a spy balloon, instead maintaining it was a weather balloon.
- Markets unlikely to rebound strongly today, as Traders likely to wait for Powell’s speech tomorrow.
- NB: the SP500 remains above 4100, in spite of the recent jobs report.
- A clear indication that liquidity continues to find its way to the market.
- The spike in a weaker ZAR, however allowing opportunities for Exporters to take advantage of these levels,
- After we breached 17/$ on Thursday to reach R16.91/$, indicating a market in favour of a FED PIVOT .
Data this week
- 20:00 ECB PRESIDENT LAGARDE SPEECH
- 08H00 SA FOREIGN EXCHANGE RESERVES $61BN EXPECTED VS $60.75BN PREVIOUS
- 15H30 : US TRADE BALANCE -$68.BN EXPECTED VS -$61.5BN PREVIOUS
- 19H40 : FED CHAIR POWELL SPEECH : THE ECONOMIC CLUB OF WASHINGTON
- 14h00 : US MORTGAGE APPLICATIONS – PREVIOUS WAS -9%
- 11H30 : SA MINING PRODUCTION -4.4% EXPECTED YOY VS -9% PREVIOUS
- 11H30 : SA GOLD PRODUCTION -3.5% CONSENSUS YOY VS -4.6% PREVIOUS
- 11H30 : SA MANUFACURING PRODUCTION -2.5% EXPECTED YOY VS -1.1% PREVIOUS
- 15H30 “ US WEEKLY JOBLESS CLAIMS +194K EXPECTED VS 183K PREVIOUS
- 09H00 : UK GDP 0.4% EXPECTED YOY VS 1.9% PREVIOUS
- 17H00 : US MICHIGAN CONSUMER SENTIMENT 64.9 EXPECTED VS 64.9 PREVIOUS
- 19H00 : US FED GOVERNOR CHRIS WALLER SPEAKS .
Market Movement Today:
Following the sharp decline of nearly 3% in the ZAR on Friday, due to the US jobs report, we understandably open close to the weaker end of the range.
- The top end of the range, remains at 17.5000.
- Expect some early Dollar profit taking as dollar longs book a steady profit.
- USDZAR first support to be around 17.4200 (the Asian session low).
- Thereafter, the market likely to trade from the WEAKER side this Monday morning.
- A break of 17.5000, could target 17.7100 on the back of a risk trade that remains on the back foot following Friday’s Jobs data.
- However, all of this likely to be reversed on “turnaround Tuesday” and Powell’s speech.
- We expect Powell to once again mention “the cumulative / lagging effects of monetary policy as well , that inflation have started to slow”.
- This will be RISK ASSET SUPPORTIVE .
Medium to long term :
- We continue to look for a stronger ZAR on the back of declining global inflation and urge readers not to lose sight of that information.
- US inflation as well as global inflation appears to be trending downwards and this will ultimately decide the FED’s course of action .
- The ZAR will benefit in this environment and Dollar spikes are likely to be short-lived , but does provide EXPORTER OPPORTUNITIES.
- TRADE: SELL USDZAR on rallies.
- USDZAR : Expect a range 17.3300-17.6000
- Importers 17.4200-17.3300
- Exporters 17.5100-17.6000
- EURZAR : Expect a range of 18.6800-18.9800
- Importers 18.7800-18.6800
- Exporters 18.8800-18.9800
- GBPZAR : Expect a range of 20.8300-21.2200
- Importers 20.9600-20.8300
- Exporters 21.0900-21.2200
- USDZAR 17.4600
- EURZAR 18.8400
- GBPZAR 21.0600
State of disaster
- The DA rejected a suggestion from the ANC NEC that Co-operative Governance and Traditional Affairs Minister Nkosazana Dlamini-Zuma to lead the national state of disaster on load shedding.
- … should it be declared.
- According to reports, the suggestion arose during the ANC’s NEC lekgotla.
- Declaring a state of disaster could unlock funds by removing red tape and other processes that slowed down the use of funds for emergency needs.
- But the DA said Dlamini Zuma abused her powers in 2020 when a state of disaster was declared over COVID-19.
- It added that it would not support a state of disaster unless a detailed outline of its structure, together with how it would be implemented, was tabled in Parliament. EWN
- Opposition parties say the announcement of Deputy President David Mabuza’s resignation should have been announced by President Cyril Ramaphosa, and not at a family gathering.
- Mabuza told mourners at a funeral service in Mpumalanga on Sunday that Ramaphosa would soon inform the country he was stepping down.
- He said he had agreed with Ramaphosa that he must step down as the country’s second-in-command.
- It would be to allow newly elected African National Congress (ANC) Deputy President Paul Mashatile to take over. EWN
- South African Rugby is facing the prospect of a R258 million budget deficit for the year, a report indicates.
- According to Afrikaans newspaper Rapport, SA Rugby president Mark Alexander informed the governing body’s executive committee of the shortfall at a meeting in Cape Town late last month.
- Three South African artists came out tops at the 65th Annual Grammy Awards, winning best global music performance for their song, Bayethe.
- Wouter Kellerman, Nomcebo Zikode and Zakes Bantwini, took to the podium, each with a special thank you message.
- Zikode, well-known as the singer in the hit-song Jerusalema thanked the audience. News 24
- Following a stronger than expected US jobs report, on Friday, the Dow lost 0.38%, the S&P 500 slipped 1.03% and the Nasdaq tumbled 1.59%.
- Analysts noting that all 11 S&P sectors finishing lower led by consumer discretionary and communication services
- US stock futures edged lower on Monday as investors cautiously awaited more earnings reports and a speech from Federal Reserve Chair Jerome Powell this week.
- The moves came as stronger-than-expected US jobs data and disappointing earnings results from major US tech companies.
- The data prompted investors to take profits and reassess the outlook for interest rates.
- However, it’s important to note, that since the Fed’s 25 basis point hike, the S&P 500 and Nasdaq still posted weekly gains.
- US 10 Year Note Bond Yield was 3.55 percent,
- The world’s most important interest rate jumping nearly 25 basis points from a low of 3.32% just head of the US Jobs report.
- The stronger jobs data, a whopping 517k actual vs 185k expected, prompting traders to unwind bets on Fed pivot, and allowing for more Fed room to hike in 2023.
- Fed Chair, Jerome Powell speaks tomorrow, and markets will watch his speech closely.
- Especially after he commented that the “disinflationary process had already started. CNBC
- The Dow declined 127 points to 33,926
- The SP500 fell 43 to 4,136
- The Nasdaq fell 193 to 12,006
- The dollar rallied strongly to close above 103. The buck gaining than 1% in the previous session.
- The stronger-than-expected US jobs data indicating the Federal Reserve has more room to hike interest rates.
- The US economy added 517K jobs in January, the most since July and much more than market expectations of 185K.
- But the Buck remains down about 10% from its September peak amid signs of cooling inflation in the US,
- As well as the Fed’s decision to deliver a smaller 25 basis point rate hike in February.
- Also, Fed Chair Jerome Powell said that the “disinflationary process has started”.
- Investors now look ahead to Powell’s speech before the Economic Club of Washington on Tuesday to gain clarity on the Fed’s policy plans.
- The dollar held recent gains against the euro, sterling and antipodean currencies, while it strengthened further against the yen. FX news
Asian markets mostly lower, after stronger-than-expected US jobs data suggested the Federal Reserve has more room to fight inflation.
- Traders also monitored simmering geopolitical tensions after the US military shot down a suspected Chinese spy balloon.
- Shares in Australia, Hong Kong and mainland China declined, while Japanese stocks gained on a weakening yen.
- In Japan the Nikkei 225 jumped 0.8% to above 27,700, reaching seven-week highs as the yen weakened sharply against the dollar.
- The Yen’s fall making Japanese assets more attractive for foreign investors.
- The yen weakened as stronger-than-expected US jobs data suggested further policy tightening from the Federal Reserve.
- Newspapers also reported that the government approached Bank of Japan Deputy Governor, Amamiya, about succeeding Kuroda as central bank head.
- Investors betting that the current ultra-easy monetary policy would extend.
- In Australia the ASX 200 fell 0.25% to close at 7,539, retreating slightly from over 9-month highs and taking cues from a negative lead on Wall Street.
- The unexpectedly strong US jobs data and disappointing earnings reports from major US tech companies halted the recent rally.
- Investors also turned cautious ahead of the RBA’s policy decision this week.
- Traders expecting the RBA to raise interest rates for the ninth straight time with a 25 basis point increase. Reuters
- Brent crude oil steadied around $80/bl per barrel on Monday, as well as US WTI crude oil holding above $73/bl.
- Over the weekend, the IEA Executive Director Birol, said China’s economy could be poised for a stronger-than-anticipated rebound that will boost demand for crude.
- A European ban on seaborne imports and price caps for Russian oil products also came into effect on Sunday.
- Last week, OPEC+ decided to maintain its current output policy, with the Saudi’s saying that the kingdom will remain cautious about raising supply.
- But, prices dropped more than 3% on Friday, bringing weekly losses to nearly 8%, after stronger-than-expected US jobs data.
- The jobs report suggested the Federal Reserve has more room to hike interest rates.
- A highly uncertain outlook for China’s demand recovery and robust Russian oil exports to Asia also weighed on energy markets. Bloomberg Energy reporting.
- Gold fell sharply on the back of a resurgent US dollar.
- The yellow metal trading below $1900/oz to handle at $1,880/oz on Monday morning.
- Bullion hovering near its lowest levels in a month amid a general dollar strength.
- The stronger-than-expected US jobs data suggested the Federal Reserve has more room to hike interest rates and also dashing expectations,
- that the Fed and other central banks will soon end their tightening cycle.
- Investors now look ahead to Fed Chair Jerome Powell’s speech before the Economic Club of Washington on Tuesday to gain clarity on future policy plans.
- Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion and vice versa. Kitco metals report