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Morning NOTE

GOOD MORNING

The ZAR consolidated between the 18.2500 to 18.0800 range ahead of Friday key US NFP report.

OPENING RATES

• USDZAR 18.1400
• EURZAR 19.3000
• GBPZAR 21.8500

SOUTH AFRICA

• President Cyril Ramaphosa is set to announce changes to his executive on Monday evening. 
  • Presidency spokesperson Vincent Magwenya revealed this while giving an update on ”relevant topical issues of public and media interest” at the Union Buildings in Pretoria on Sunday. 
  • “The president will announce the new national executive tomorrow, Monday 6 March, at 19:00,” he said.
  • Magwenya said that while Ramaphosa was still nursing a cold, the president was busy finalising the formation of the executive. Ewn
     
• National Treasury’s stealthy tightening of exchange controls
  • The steadily depreciating rand has significantly shrunk the amounts South Africans can take offshore.
    • Surprisingly, the National Treasury did not increase South Africa’s foreign allowances in its 2023 Budget.
    • It was the 11th consecutive year that the Single Discretionary Allowance (SDA) of R1 million
      • and the seventh successive year that the Foreign Investment Allowance (FIA) of R10 million remained unchanged.
  • Unfortunately, inflation and a much weaker exchange rate have significantly reduced the dollar amounts South Africans can send offshore.
    • It suggests that the National Treasury has progressively tightened exchange controls, almost by stealth.
    • This starkly contrasts the government’s steady relaxation of exchange controls since 1994. Moneyweb

GLOBAL MARKETS

Stocks:

• US stock futures eased on Monday as investors braced for a week filled with economic data and the latest commentary from the Federal Reserve.
  • Futures contracts tied to the three major indexes were all down at least 0.1%. Last week, the Dow gained 1.75%, the S&P 500 climbed 1.9% and the Nasdaq Composite jumped 2.58% as risk sentiment improved.
  • Atlanta Fed President Raphael Bostic said last week that he still sees the central bank raising rates by another quarter percentage point later this month and that it could be in a position to pause rate hikes sometime this summer.
• Investors now look ahead to Fed Chair Jerome Powell’s congressional testimony on Tuesday and Wednesday for further guidance on the central bank’s tightening plans.
• US factory orders data are also due for release later on Monday, while the February jobs report is slated for Friday. CNBC

Bonds:

• The yield on the US 10-year note, seen as a proxy for global borrowing costs, topped 4%, approaching an over 14-year high of 4.3% reached in October.
• A  batch of hot economic data strengthened expectations that the Federal Reserve will raise interest rates to a higher level and keep them restrictive for longer.
• Data from the US Department of Labour showed that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week,
  • pointing to a still-tight labour market and opening the door for further interest rate increases.

On Friday

• The Dow added 387.4 to 33,390.97
• The Sp500 gained 64.29 to 3,045.64
• The Nasdaq added 226.02 to 11,689.01

:  image: Trading economics

OVERNIGHT HEADLINES

The Dollar

• The dollar remained  subdued around 104.4 on Monday as investors cautiously awaited Federal Reserve Chair Jerome Powell’s congressional testimony on Tuesday and Wednesday.
• Investors also focussing on Friday NFP report, especially after last month’s surprise to the upside.
• Markets are expecting the central bank to raise interest rates by another 25 basis points at its March meeting in light of stronger-than-expected US economic data.
• But analysts remain divided on what the likely peak for rates could be.
• In the latest Fed commentary,
  • San Francisco Fed President Mary Daly said US rates need to stay higher for longer.
    • amid concerns about recent hotter-than-expected inflation data and worries about global economic trends that could fuel price pressures.  FX NEWS

Asian markets

• Remained mixed, on Monday as Beijing disappointed markets by setting a modest growth target for this year.
  • Investors also digested a report showing South Korean inflation slowed more than expected in February, while awaiting more data from major Asian economies this week.
  • Shares in Hong Kong and mainland China fell, while Australian, Japanese and South Korean stocks rose.

• In Japan, the Nikkei 225 jumped 1.11% to close at 28,238, hitting multi-month highs as Japanese technology stocks tracked their US peers higher following a sharp pullback in Treasury yields.
  • Investors also continued to assess China’s modest growth target for this year set in its parliamentary sessions, while awaiting more US economic data and further Federal Reserve commentary this week.
  • Gains in the technology sector were led by SoftBank Group (2.7%),

Crude oil

• Brent crude futures fell toward $85/bl, giving back some gains from last week as Beijing disappointed markets by setting a modest economic growth target for this year.
• The Chinese Premier announced a GDP target of 5% for China in 2023 at the annual National People’s Congress on Sunday, lower than markets anticipated.
• Investors also continued to fret about the prospect of further monetary tightening from the US Federal Reserve as its struggles to bring inflation back down within target.
• Elsewhere, EIA data showed that US crude inventories rose by 1.166 million barrels in the week ended Feb. 24th, much higher than market forecasts for a 457,000 barrel increase. GULF ENERGY NEWS

Gold

• Gold steadied above $1,850/oz Monday as investors cautiously awaited Federal Reserve Chair Jerome Powell’s congressional testimony on Tuesday and Wednesday .
  • Traders looking for  further guidance on the US central bank’s tightening plans.
  • Investors also looked ahead to the monthly US jobs report on Friday that could influence how aggressive the Fed will need to be in the upcoming meetings.
  • Meanwhile, the yellow metal gained more than 2% last week as traders scaled back bets on a hawkish Fed.
  • 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