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Morning NOTE

7 November 2022


The ZAR gained 2.88% after a stronger than expected NFP report, but higher US unemployment rate that printed at 3.7%.


  • The Rand gained on what can just be described as Algo’s feasting on stop losses in thin New York Trading.
    • The local unit gained more than 50 cents at one stage after the Dollar was sold across the board.
    • After opening at 18.4000, USDZAR reached 17.8700 in thin New York trading as stops were triggered.
    • This morning we are back at R18/$, as markets look through a calmer lens.
    • The Dollar recovering in Asian trading, after China ended discussions around “ easing restrictions around Covid-19”.

On Friday , US NFP beat market expectations with +261K VS +200K EXPECTED  and the unemployment rate was at 3.7% vs 3.6% expected.
This week;

  • Traders continue to assess the outlook for US interest rates,
    • A mixed US jobs report last week reinforcing expectations that the Federal Reserve will slow the pace of rate increases in December.
    • Markets are currently betting that the Fed will hike rates by 50 basis points next month after delivering four successive 75 basis point rate increases.
  • Risk event this week:
    • Markets turning their attention to US inflation on Thursday.

Significant Market Data:


  • 11h30: SA mining, Gold and Manufacturing data
    • Mining expected at -4.3% YOY vs -5.9% previous
    • Gold expected at -15.7% YOY vs -17.4% previous
  • NB:  contraction continues in SA’s industrial sector, as the industry suffers at the hands of ESKOM and loadshedding and Labour demands.


  • The ZAR losing ground in early trading after a violent USD sell-off following Friday’s NFP report.
    • Traders citing algo’s hunting stops in thin Friday liquidity conditions in New York.  
  • This morning we opening weaker of Friday’s strongest levels with the ZAR once again above 18/$.
    • We are also inside Friday’s large range (18.4000-17.8700).
    • However, with the USD index above 111 and US 10Y’s above 4%, stocks also lower before the European open.
    • THUS : It is unlikely to see a “WEAKER DOLLAR” in this environment. 
  • Nb: With very little data this week, Traders turning attention to Thursday’s key US CPI report.
    • This will be the new directional driver for Dollar and the ZAR.

      NB: Weaker numbers out of the USA could result in the ZAR finally turning the corner and we see gains heading into the end of the year.
      However, higher than expected CPI will reverse this picture and we could see a ZAR closer to 18.5000-19.0000 as we head into the December period.  

  • Trade: today  BUY USDZAR on dips .

Expected Ranges

  • USDZAR :  Expect a range 17.7900-18.1800
    • Importers 17.9200-17.7900
    • Exporters 18.0500-18.1800
  • EURZAR :  Expect a range of 17.7400-18.0100
    • Importers 17.8300-17.7400
    • Exporters 17.9200-18.0100
  • GBPZAR :  Expect a range of 20.2200-20.5500
    • Importers 20.3300-20.2200
    • Exporters 20.4400-20.5500


  • USDZAR 18.3100
  • EURZAR 17.9300
  • GBPZAR 20.5200


  • The campaigning for the ANC leadership and possible SA presidency continued this weekend .
    • Former president, Jacob Zuma also had his say in the Phala-Phala saga.
    • Zuma told party supporters in Ethekwini on Sunday that they should raise questions at Nasrec about the robbery at Ramaphosa’s game farm in 2020.
    • Ramaphosa has denied accusations of a cover-up and contravention of the country’s laws after the alleged theft of millions of dollars at his farm. EWN
  • Energy Minister Gwede Mantashe says the country’s renewable energy transition shouldn’t come at the expense of coal mining communities.
    • Mantashe was speaking in Carletonville on Sunday at the ANC’s Letsema programme.
    • President Cyril Ramaphosa said last week that he had approached the US government for a loan as part of government’s multi-trillion rand plan to move the country to a zero-carbon economy.
    • Mantashe said on Sunday there are communities that are going to be affected by this transition.
    • He also called on developing countries to help in footing the bill.  Thus far $8.5bn has been pledged to help SA.  EWN

      Eskom and higher electricity prices

  • A settlement reached by Eskom and energy regulator Nersa, related to a crucial element in the determination of the power supplier’s average tariffs.
    • Analysts say it may cost consumers dearly when the regulator finalises what consumers will be paying for electricity in the next two financial years.
    • The tariff determination is on the agenda of a Nersa electricity sub-committee meeting on Tuesday,.
    • It is  expected to make a recommendation to the regulator about the 32% increase Eskom wants in April next year and a further 10% a year later.  Moneyweb



  • US stock futures fell on Monday as sentiment was dampened after China reiterated its commitment to its strict Covid Zero policy over the weekend.
    • Also, investors also remained cautious ahead of key US inflation report this week. Futures contracts tied to the three major averages declined at least 0.6%.
    • Hurting sentiment further, Apple warned of reduced iPhone 14 and iPhone Pro Max production due to Covid-related disruptions at an assembly facility in Zhengzhou, China.
    • Last week, the major averages ended lower as the Federal Reserve signalled a more hawkish stance than markets anticipated.
    • The Dow losing 1.4%, while S&P 500 and Nasdaq Composite tumbled 3.4% and 5.7%, respectively. 

Major corporate news is that META (Facebook’s parent), plans significant reduction in employee numbers. This according to the Wallstreet Journal.

  • The layoffs are expected to impact thousands of employees, the report said, and the move would mark the first major headcount reduction in Meta’s history.
    • At the end of September, the company reported that it had more than 87,000 employees.
  • A Meta spokesperson declined to comment and referred CNBC to Zuckerberg’s comments on the company’s latest earnings call last month.
    • The layoffs are expected to impact thousands of employees, the report said.
  • Meta shares have plummeted 73% this year, falling to their lowest since early 2016, and the social media giant is now the worst performer in the S&P 500 in 2022. Reuters


  • US 10 Year Note Bond Yield was 4.15% in early Monday trading. As trader price in a 50bps hike by the Fed in December after last week’s 75 bps hike.
    • Attention also turning to Thursday’s US CPI report with 8% YOY expected.
      • The benchmark interest rate consolidating above 4% after a stronger than expected US NFP report, although the unemployment rate dripped higher at 3.7%.
  • On Friday, data showed, the US economy added a stronger-than-expected 261K jobs in October of 2022.
    • It was above market forecasts of 200K.
    • Although it is the weakest reading since December of 2020, figures continued to point to a strong labour market.
    • Also, September were revised higher by 52K to 315K.  CNBC


  • The Dow  gained 401 to 32,403
  • The SP500 added 50 to 3,770
  • The Nasdaq  added 132 to 10,475


Asian markets higher across the region following the rally on Wallstreet on Friday .

  • In Japan, the Nikkei 225 added 1.21% to close at 27,528, recouping some losses from the previous session.
    • Japanese shares tracked a Friday rally on Wall Street as investors continued to assess the trajectory of US Federal Reserve rate hikes.
    • Meanwhile, market caution capped gains as China reiterated its commitment to the strict zero-Covid approach over the weekend, dashing hopes for a policy pivot.
    • After the Covid announcement, more bad news out of China.
      • The country reported its exports unexpectedly shrink in October, badly missing expectations for growth.
        • China’s exports and imports fell in October in U.S.-dollar terms, according to customs data released Monday.
        • That decline missed Reuters expectations for growth in both categories.
        • China’s exports to the U.S. fell in October for a third-straight month.
  • In Australia, the S&P/ASX 200 Index climbed 0.6% to close at 6,934 on Monday, rising for the second straight session, as firmer metals prices lifted shares of local mining stocks.  Bloomberg
  • The US dollar index strengthened to around 111 on Monday.
    • The Buck recouping some losses from the previous session as it benefited from haven demand after China quashed hopes that it was planning to gradually ease Covid restrictions.
      • Traders also continued to assess the outlook for US interest rates, with a mixed US jobs report last week reinforcing expectations that the Federal Reserve will slow the pace of rate increases in December.
      • Markets are currently betting that the Fed will hike rates by 50 basis points next month after delivering four successive 75 basis point rate increases.
      • However, a hotter-than-expected US inflation report on Thursday would likely fuel bets for another 75 basis point rate hike and drive a fresh dollar rally.
      • The dollar gained across the board, with the most pronounced buying against the Chinese yuan and Australian and New Zealand dollars. FX news


  • Crude oil  Brent futures fell more than 1% toward $97/bl as Chinese authorities reiterated their commitment to the stringent zero-Covid approach over the weekend.
    • The news dashing hopes for a policy pivot that was expected to revive demand in the world’s top crude importer.
    • A top health official in China defended the country’s current Covid controls, saying “previous practices have proved that our prevention and control plans and a series of strategic measures are completely correct.”
    • A tightening supply outlook also kept upward pressure on oil prices after OPEC+ agreed to reduce output by 2 million barrels per day in November, the largest cut since the start of the pandemic.
    • Moreover, the European Union ban on Russian oil set to take effect in December, adding to supply concerns. Gulf energy news
  • Gold prices fell toward $1,670 an ounce on Monday, retreating from a three-week high reached in the previous session as the dollar rebounded slightly from Friday’s slump.
    • The yellow metal spiking on Friday after the Dollar took a surprise pounding vs the Risk complex.
    • Traders also continued to assess the outlook for US interest rates, while looking ahead to a key US inflation report this week that could influence the size of an expected Federal Reserve rate hike in December.
      • Markets are currently betting that the Fed will slow the pace of rate increases by delivering a 50 basis point rate hike next month after raising interest rates by an outsized 75 basis point in the last four meetings.
    • However, a hot inflation print would likely fuel bets for a larger 75 basis point increase, supporting the dollar while pressuring gold. Kitco metals report

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