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Morning NOTE

6 July 2023


The ZAR declined on the back of a hawkish Fed minutes report, that indicated more rates hikes in 2023.


The Rand lost nearly 1% to trade weaker at R18.8000/$ following the release of the Fed minutes.

  • The minutes indicated members remained concerned about  the levels of inflation and were determined to get it back to 2%.
    • The minutes also showed that almost all FOMC participants judged it appropriate to leave the fed funds rate steady in June.
    • But, all officials continued to anticipate that, with inflation still well above 2% goal and the labour market remaining very tight,
      • that maintaining a restrictive stance for monetary policy would be appropriate, and almost all considered appropriate to raise borrowing costs again this year.
    • After the FOMC decision, Fed Chair has reinforced several times the need to raise rates further this year. Source: Federal Reserve
  • The Dollar advance continued with the Buck firmly above the 103 level after the 10YT yield spiked to 3.96%.
    • Higher US rates remain supportive of the Dollar at the expense of Risk assets like Stocks and high-yielding FX.
    • The ZAR squarely in the high yielding carry space.
  • This afternoon we welcome US Jobless claims as well as US PMI services.
    • Service PMI expected at 51.
    • Last month, the ISM Services PMI fell to 50.3 in May of 2023 from 51.9 in April.
    • The data pointing to the fifth consecutive month of expansion in the services sector, but the slowest in the current sequence.
    • NB: Fed officials continue to watch PMI data for signs of inflation in economy .

Data This week



  • 14H30 : US NON FARM PAYROLLS expected +225K VS +339K PREVIOUS

Market Movement Today:

  • The Rand weaker this morning following hawkish Fed minutes.
    • The recent FOMC minutes indicating that officials voted unanimously in favour of a pause,
    • BUT were highly supportive off additional rate hikes in 2023.
  • Inflation remains a concern and the objectives are to get the CPI rate back to 2%.
    • Officials citing a tight labour market as a cause for concern and that a continuation of restrictive policy are needed to slow the pace of inflation.
  • The local unit losing 20 cents or 1.1% to briefly trade through the R18.80/$ level.
    • The US10yt YIELD spike to 3.96% in early trading, with the crucial 4% level once again in play.
    • Higher yields correlates with an under performing risk complex i.e. stocks, precious metals and high yielding currencies, like the ZAR
  • The market approaching a test of 18.8500 (the Monday high) and a break opening up the potential for a more towards 19.0400.
    Tomorrow’s non-farm payrolls report ( markets expecting + 225k), remains highly anticipated.
    A stronger jobs report supportive of the Dollar and a lower report could reverse the recent Dollar rally and be ZAR supportive.

    Risk events, Weekly Jobless claims, US Services PMI and Friday’s jobs report

  • Trade : BUY USDZAR on dips (i.e. SELL ZAR)

Markets this morning

  • USDZAR 18.7500
  • DOLLAR 103.20
  • EURUSD 1.0865
  • SP500 4,427
  • GOLD 1920
  • US10YT 3.96%

Expected Ranges:

  • USDZAR : Expect a range 18.6600-18.8700
    • Importers : 18.7300-18.6600
    • Exporters : 18.8000-18.8700
  • EURZAR : Expect a range of 20.2500-20.4900
    • Importers : 20.3300-20.2500
    • Exporters : 20.4100-20.4900
  • GBPZAR : Expect a range of 23.7100-23.9800
    • Importers : 23.8000-23.7100
    • Exporters : 23.8900-23.9800


  • USDZAR : 18.7500
  • EURZAR : 20.3800
  • GBPZAR : 23.8400


DA (WC) vs ANC

  • The DA in the Western Cape is rushing to implement its Provincial Powers Bill before next year’s national elections. 
  • The bill will see the party devolve certain functions from the national to provincial government.
  • On Wednesday, the party launched a scathing attack on the ANC government.
  • The party also set the record straight following criticism from opposition parties last month labelling the bill as an attempt by the DA to create an independent country within the country. 
  • The party’s federal chairperson, Dr Ivan Meyer, said the ANC government was incapable and incompetent in ruling the country. Source News24


  • Gauteng’s Premier confirmed that the death toll from the Boksburg gas leak rose to 17.
  • On Wednesday night, a gas cylinder carrying nitrate oxide is believed to have leaked at the Angelo informal settlement – killing those in the area.
  • Lesufi said a young man succumbed to the gas inhalation – raising the death toll.
  • Police made it to the scene, and emergency services said 16 others were rushed to hospital. Source EWN


  • Coronation asset management’s, R105bn ‘Reg 28 fund’ now at the max offshore allocation
  • A year and a half ago only 23% of holdings were foreign … now it’s over 45%!
  • The  flagship Balanced Plus fund has aggressively shifted the weighting of its assets under management to the offshore limit – 45% – over the last 12-18 months.
  • The fund is the second-largest unit trust by size in the country.
  • The fund is regarded as  one of the cornerstones of any Regulation 28-compliant retirement investment. Source : Moneyweb


Stocks lower after the Fed minutes call for more rate hikes.

  • US stock futures fell further on Thursday after the major averages declined during Wednesday’s regular session.
    • Investors digested the latest Federal Reserve policy meeting minutes which showed that most officials would support more rate increases ahead.
    • Futures contracts tied to the three major indexes were all down at least 0.4%.
    • In regular trading on Wednesday, the Dow fell 0.38%, the S&P 500 lost 0.2% and the Nasdaq Composite shed 0.18%.
    • The hawkish Fed minutes reinforced expectations that the central bank will hike rates again this month, prompting caution among investors.
    • Markets now look ahead to the latest ADP private payrolls and initial jobless claims figures on Thursday, as well as services PMI reports.

Yields higher after FOMC minutes showed FED likely to hike rates again in 2023.

  • The yield on the US 10-year Treasury note maintained its position above the 3.9% threshold.
  • It was the highest level since early March after the minutes from the June’s FOMC policy-setting meeting revealed that a majority of policymakers were in agreement that further interest rate hikes would be appropriate during 2023.
  • Officials acknowledged that inflation, despite a recent slowdown, remained significantly above the Federal Reserve’s 2% target, while emphasizing the persistently tight labour market.
  • Markets pricing for another 25 bps hike at the next FOMC meeting. | Source : Bloomberg


  • DOW -129 at 34,288
  • NASDAQ -25 at 13,791
  • SP500 -8 at 4,446

image: Trading economics


Asian markets
Eastern markets sharply lower after Fed minutes indicate the FED likely to raise further this year.

  • In Japan, the Nikkei 225 Index dropped 1.7% to close at 32,773, sliding for the third straight session as investors took some profits on high-flying technology stocks.
    • Japanese shares also tracked losses on Wall Street overnight after the latest Federal Reserve policy meeting minutes showed that most officials would support more rate increases ahead.
    • Losses were led in the technology sector but other index heavyweights also declined, including Mitsubishi UFJ (-1.9%). | Source Reuters
  • In Australia, the ASX 200 Index fell 1.24% to close at 7,163 on Thursday, sliding for the second straight session, with mining stocks leading the decline amid softer metals prices.
    • Australian shares also tracked losses on Wall Street overnight after the latest Federal Reserve policy meeting minutes showed that most officials would support more rate increases ahead.
    • Iron ore, gold and lithium miners slumped, with notable losses from BHP Group (-2.5%), Rio Tinto (-1.6%),
      • while Financial, industrial, energy, healthcare and consumer-related stocks also declined. Source : CNBC

Oil prices remained well supported on the back of fresh production cuts by OPEC+

  • US WTI crude remained higher, around the $72/bl level.
    • Prices spiked nearly 3% in the previous session, supported by supply cuts from major oil producers and a large drawdown in US crude stockpiles.
    • Earlier this week, Saudi Arabia said it would extend a July production cut of 1 million barrels per day through August, while Russia said it would cut exports by 500,000 bpd.
      • Saudi Energy Minister Prince Abdulaziz bin Salman said the joint output cuts proved sceptics wrong, warning that OPEC+ will do “whatever necessary” to support the oil market.
    • In the US, industry data showed that crude inventories in the country declined by 4.382 million barrels last week.
      • It was the third consecutive weekly draw and nearly double the 2.408 million barrel drop from the preceding week.
      • Meanwhile, a raft of PMI data pointed to weakening manufacturing activity in major economies, clouding the outlook for the global growth and energy demand. Source: Gulf News

Precious metals lower after FED minutes indicated the propensity for more rate hikes in 2023.

  • Gold traded around $1,920/oz on Thursday, hovering close to its weakest levels in over three months.
    • Bullion remained under pressure from a hawkish outlook on US monetary policy.
    • Minutes of the US Federal Reserve’s June policy meeting showed that most officials would support more rate increases ahead to combat stubbornly high inflation.
    • This reinforced expectations that the Fed will raise rates by 25 basis points this month.
    • Investors now look ahead to a key US monthly jobs and other economic reports this week for more clues on the rates path. Source: Kitco

Major currencies retreating against the Dollar after the FOMC minutes indicated their appetite for more rate hikes.

  • The US dollar held its recent advance to around 103.4 on Thursday, approaching its highest levels in over three weeks.
  • The Buck supported as the latest Federal Reserve policy meeting minutes reinforced expectations for a rate increase this month.
  • The minutes showed that a vast majority of policymakers expect further rate increases this year to curb stubbornly high inflation amid a so-far resilient labour market.
  • Investors now look ahead to the latest ADP private payrolls and initial jobless claims figures on Thursday, as well as services PMI reports. Source : Forex news

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