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Morning NOTE

7 September 2022


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




  • 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.

Expected Ranges

  • 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



  • Power cuts are back and Eskom has warned that South Africans can expect the rolling blackouts to continue into the weekend.
    • The SOE said it announced the implementation of stage 2 power cuts between 4pm and 10 pm last night.
    •  Business Unity South Africa (Busa)  raised concerns that the ongoing power outages could lead to a further decrease in the country’s gross domestic product (GDP) in the third quarter of the year.
    • On Tuesday, Statistics South Africa (StatsSA) announced that the South African economy shrunk by 0.7% in the second quarter of 2022. EWN
  • STATSA SA reported, that SA GDP contracted  by 0.7% on quarter in the three months to June of 2022.
    • This was compared with market forecasts of a 0.8% fall, as devastating floods in KwaZulu-Natal and intense power rationing had a negative impact on a number of industries.
    • Seven out of ten activities contracted, with manufacturing hit the most (-5.9% vs 5% in Q1).
    • Other sharp declines were seen in agriculture (-7.7% vs -2.4%), mining & quarrying (-3.5% vs -2.1%) and trade, catering and accommodation (-1.5% vs 3.1%).  Stats SA
  • Spar joins Pick n Pay in objecting to proposed merger of Shoprite and Massmart
    • The Competition Tribunal, on the second day of the hearing, heard submissions from Spar and the South African Commercial Catering and Allied Workers’ Union (Saccawu).
    • The issue related to the proposed merger of Shoprite Supermarkets acquiring certain stores from Massmart Holdings.
    • Shoprite plans to acquire 56 retail supermarket stores and 43 retail liquor stores operated under the brand names Rhino Cash & Carry, IOL


  • 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.
    • 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


  • Asian markets all tracking Wall Street lower as Fed fears continue to dominate market sentiment across the globe.

    • In Japan, the Nikkei 225 fell 0.71% to 27,430, hitting its lowest levels in 7 weeks. The benchmark tracking overnight losses on Wall Street.
      • Investors are also tracking sharp yen moves which Japanese Finance Minister Shunichi Suzuki considered “somewhat rapid and one-sided”.
        • This prompting speculations that authorities may intervene in the currency markets to arrest its slide.
      • Data confirming the Federal Reserve will continue to aggressively raise interest rates.
    • In Australia, the ASX 200 declined 1.42% to 6,729, the Aussie benchmark dragged down by losses in energy and mining stocks.
      • Australian shares also tracked Wall Street lower, as a strong US services sector report reinforced expectations that the Federal Reserve will continue to aggressively raise interest rates.
        • On Tuesday, the RBA  lifted its policy rate by 50 basis points to 2.35% and signalled further tightening to curb surging inflation.
  • Crude oil  declined with the benchmark US WTI contract falling to $86/bl.
    • Traders citing concerns about weakening demand driven by aggressive monetary tightening across the globe.
      • Oil and other risk assets have also come under pressure from a rallying dollar and surging US Treasury yields.
        • In China, major cities have introduced fresh Covid lockdowns that threatened further economic damages and subdued fuel demand.
    • Meanwhile, OPEC+ earlier this week unexpectedly agreed to cut output by 100,000 barrels a day from October, but the move failed to stop a rapid decline in oil prices.
  • Gold declined to $1697/oz and in turn below key support of $1,700/oz. The Yellow metal sliding towards the lowest levels in over two years.
    • Gold traders citing a rallying dollar and rising Treasury yields as the key market driver.
    • Federal Reserve will continue to aggressively raise interest rates and this will keep Bullion on the back foot.
  • The US dollar rallied further to 110.50 index and in turn  reaching levels not seen since June 2002.
    • Data wise a strong US services sector report reinforced expectations that the Federal Reserve will continue to aggressively raise interest rates.
      • The ISM Services PMI rose to 56.9 in August from 56.7 in the previous month, beating market forecasts of 55.1 and pointing to the strongest growth in services activity since April.
      • The data has bolstered the view that the US economy was not in a recession.
    • The dollar also tracked surging Treasury yields, with the benchmark 10-year US yield jumping to its highest level since June.
      • Moreover, recession fears in Europe exacerbated by a worsening energy crisis and fresh Covid lockdowns in China drove safe haven inflows to the dollar.

    • The Japanese yen weakened past 141 against the dollar, hitting its lowest levels since August 1998. On record this appears to be the worst performance since data records were started on the currency from the land of the rising sun.
      • The divergence in policy between The BOJ  and the FED continues to weigh on the YEN.
      • While the Federal Reserve has been talking up further monetary tightening to stamp out inflation.
      • This view has been countered by BOJ Governor Haruhiko Kuroda, who recently reiterated the need to keep policy ultra-loose.
        • His argument that external factors are driving domestic inflation higher will start easing next year.
        • This has left the yen among the world’s only zero-yielding currencies, fuelling bets of further depreciation and a possible government intervention in the foreign exchange markets.
      • Japanese Finance Minister Shunichi Suzuki commented on sharp yen moves on Tuesday, saying heightened volatility was “undesirable” and that he was watching currency markets with a “great sense of urgency.”

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