The ZAR weakened on the back of a rampant Dollar as well as concerns after Eskom re-introduced load shedding.
- The Rand weakened to 17.3700 after Risk assets retreated in New York trading.
- The local unit also weakening sharply after the Eskom announced forced loadshedding after news on the weekend highlighted problems at SA’s Koeberg Nuclear facility.
- The facility losing 920 MW of power forcing a new round of loadshedding.
- The SOE said the process to return the unit to service was underway, it would not give a specific timeline for its synchronisation back onto the grid.
- Eskom reiterated that there were no nuclear safety concerns surrounding the latest incident.
- Earlier in the day, the Dollar powered ahead after US PMI data beat forecasts, all but confirming a 75 bps hike by the FED.
- The Greenback sending the Euro back through parity (0.9890 at the time of writing) as well as the USDJPY to 144.
- The Yen weakening to levels not seen since 1998, as policy disconnect between the BOJ and the FED plays out in the Fx markets.
- Earlier, BOJ Governor Haruhiko Kuroda reiterated the need to keep policy ultra-loose, arguing that external factors driving domestic inflation higher will start easing next year.
- This sounds similar to the policy mistakes of central banks ( the FED and ECB), in late 2021, where they insisted “inflation was transitory”
- Supporting the US Dollar was a spike in treasury yields , with the benchmark US10YT trading at 3.34%.
- The ZAR once again at the mercy of international capital flows, as the highly unlikely the local unit will see any gains in this environment.
- SA GDP also coming inline with expectations although the economy contracting to 0.2% growth YOY vs 2.7% previous.
- The slowdown also weighing on the Rand.
Significant Market Data
- 08h00 SA FOREIGN RESERVES : Printed slightly higher than expected at +$59.756BN
- 11h00 EU GDP 3.9% YOY EXPECTED VS 5.4% PREVIOUS
- 11H00 SA CURRENT ACCOUNT +R143BN PREVIOUS VS R100BN
- 15H10 : US FED CHAIR JAY POWELL SPEECH
- 14H15 ECB RATES DECISION – EXPECTED +75 BPS
- This morning we opening SHARPLY weaker on the back of a rampant Dollar.
- Expect some early export profit taking with mining houses likely to take advantage of elevated levels.
- A drift towards 17.3000 a possibility, but IMPORTERS ARE ADVISED TO BUY DOLLARS NEAR THESE LEVELS.
- The spike in US interest rates continues to drive markets as the Dollar remain BID ACROSS THE BOARD.
- The uncertainty around the, ECB rate decision likely to cause more volatility in the market.
- Expectations ranging from 50, 75 to even 100 bps .
- Likely that the hike would be 75 bps.
- Medium term markets are looking ahead to the FED in September and this remains the driver of any directional bias for the local unit.
- USDZAR : Expect a range 17.1500-17.5100
- Importers 17.2600-17.1500
- Exporters 17.3800-17.5100
- EURZAR : Expect a range of 16.9500-17.3500
- Importers 17.0900-16.9500
- Exporters 17.2100-17.3500
- GBPZAR : Expect a range of 19.7300-20.0500
- Importers 19.7800-19.7300
- Exporters 19.9600-20.0500
- USDZAR 17.3300
- EURZAR 17.1500
- GBPZAR 19.8800
- Stocks were lower in regular trading on Tuesday. The Dow and S&P 500 dropped 0.55% and 0.41%, respectively, for their sixth losing session in seven days.
- In early Asian trading, US stock futures extended losses on Wednesday, facing renewed pressure from a strong Dollar and a surge in Treasury yields.
- Futures contracts tied to the three major indexes were all trading in negative territory.
- Investors continued to worry about the Fed’s aggressive fight against inflation.
- Powell’s speech on Thursday also a hot topic.
- The US 10-year US yield spiked to 3.34%, as investors accept the outlook for monetary policy as the Fed seeks to rein in soaring inflation.
- The FOMC DETERMINED TO HIKE RATES EVEN AS GROWTH SLOWS.
- This even after the US economy is slowing and some industries such as housing show signs of weakness. However supporting the ultra-hawkish Fed, is a labour market that remains robust.
- Money markets are now pricing on an almost 70% chance of another supersized 75 basis-point interest rate hike in September.
- The Dow declined 173 to 31,145
- The SP500 fell 16 to 3,908
- The Nasdaq dropped 85.95 to 11,544