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Morning NOTE

8 December 2022


The ZAR strengthened on the back of lower US yields as the Dollar came under pressure across the board.


  • The Rand benefitted from broad-based Dollar weakness after US yields fell below the 3.50% level and the Dollar retreated.
    • The local unit tracking the Euro higher as the Dollar retreated across the board.
    • Investors pointing to mix data sets that ensures the Fed does 50 bps in December and will likely slowdown in 2023.
  • This was backed up by the Bank of Canada that hiked by 50bps, but followed up with dovish comments from the BOC governor.
    • The Governing Council noted it will consider if the interest rate needs to rise further,
    • suggesting slower rate hikes or a possibility of an end to the tightening cycle. 
  • There was however a disconnect as global stock markets remained on the back foot as Recession chatter increased.
    • The SP500 trading at 3935, even though the US10YT traded at 3.45% .
    • The price action indicating markets that remain unsure and will welcome clarity from the FED next week.
    • The Fed is expected to hike by 50 bps next week.

Significant Market Data:





  • The ZAR stronger on the back of  a weaker Dollar as global markets ignore SA’s power crises.
    • The Rand gaining more than 2% as US yields continue to trade lower, as US recession noises continue to grow.
      • Yesterday, the  Euro also traded above 1.0500 as traders exited the US Dollar.
    • Comments from the Bank of Canada that their hiking cycle is coming to an end supported  Risk currencies ,
      • The BOC HIKED 50 BPS  but alluded that rates could have peaked.
      • The comments sending US yields lower as the US 10YT traded at 3.45%
  • Currently traders happy to buy ZAR on the back of falling yields even though the ESKOM crises continues to worsen.
  • Today: we opening at the lower end of the weekly range (17.1500) ,
    • and it would not be a surprise to see some Profit taking on  back into the mid 17.20’s

Trade: Range trade
BUY 17.0000 &
SELL 17.2200-17.3300

  • Nb: If the US Rate cycle slows down we expect a stronger ZAR in 2023.

Expected Ranges

  • USDZAR :  Expect a range 17.0000-17.33000
    • Importers 17.1100-17.0000
    • Exporters 17.2200-17.3300
  • EURZAR :  Expect a range of 17.8800-18.2100
    • Importers 17.9900-17.8800
    • Exporters 18.1000-18.2100
  • GBPZAR :  Expect a range of 20.7900-21.0900
    • Importers 20.8900-20.7900
    • Exporters 20.9900-21.0900


  • USDZAR 17.1500
  • EURZAR 18.0500
  • GBPZAR 20.9500


  • President Cyril Ramaphosa has declared Tuesday 27 December a public holiday.
    • This year, Christmas falls on a Sunday and in terms of the Public Holidays Act,
      • “whenever a public holiday falls on a Sunday, the following Monday shall be a public holiday”.
      • But in this case, the following Monday – the Day of Goodwill – is already a public holiday.
      • This has led to calls from the unions, in particular, to declare the following Tuesday – the 27th – a public holiday.
        • And those calls have now been answered.
  • Eskom said that stage 6 power cuts, which were last implemented in September, would be in effect until further notice.
    • The ailing power utility said that this was due “to a high number of breakdowns since midnight,
      • as well as the requirement to strictly preserve the remaining emergency generation reserves”.


  • In regular trading on Wednesday, the Dow ended flat, while the S&P 500 and Nasdaq fell 0.19% and 0.51%, respectively.
    • Eight out of 11 S&P sectors declined, led by communication services, technology and consumer discretionary.
    • Those moves came as the bond market flashed growing recession fears, reflecting recent warnings from top US executives who flagged a possible recession next year.
    • This morning, US stock futures edged lower on Thursday, extending losses as investors grapple with mounting recession fears and lingering uncertainties around the path for Federal Reserve rate hikes.
      • Futures contracts tied to the three major indexes were all down about 0.2%.


  • The yield on the US 10-year Treasury, traded lower to 3.44% as investors piled into government debt
    • On the back of prospects that the Federal Reserve will soon slow its pace of rate hikes and fears of an economic slowdown.
      • While better-than-expected ISM services and Jobs data brought some uncertainty regarding the Fed funds terminal level,
      • markets continued to price in an 80% chance that the US central bank will hike rates by 50 basis points in December.
    • On top of that, some sectors of the US economy, including housing and industry, have been flashing recessionary signs.
      • Meanwhile, the gap between 2 and 10-year bond yields widened to over 80 basis points, the largest since at least 1981.


  • The Dow added 1.58 pts to 33,597
  • The SP500 fell 7 to 3,933
  • The Nasdaq  fell 56 to 10,597


  • Asian markets broadly lower tracking price action on Wallstreet after the major markets failed to rally in New York.
    • In Japan, the Nikkei 225 fell 0.4% to close at 27,574, hitting its lowest levels in about a month as growing recession fears globally and expectations that the US Federal Reserve will tighten further weighed on risk assets.
      • Investors also reacted to data showing Japan’s economy contracted less than expected in the third quarter, while the country’s current account unexpectedly turned to deficit in October
    • In Australia, the ASX 200 Index fell 0.75% to close at 7,176, with energy and mining stocks leading the losses as declining global growth prospects gripped commodity markets.
    • Investors were also on edge due to lingering uncertainties around the path for US Federal Reserve rate hikes. Energy firms led the losses on weaker oil prices, 
  • Crude WTI futures stabilized above $72 /bl on Thursday after falling for four straight sessions.
    • Traders booked some profits on short positions and turned their attention to China’s easing Covid restrictions that could boost demand in the world’s top crude importer.
    • Investors also continued to assess the implications of the latest sanctions on Russia, including a US-led price cap on Urals and a European Union embargo on seaborne imports of Russian oil.
    • Brent crude futures also, stabilized above $77 per barrel on Thursday after falling for four straight sessions,
  • Gold rallied on the back of a weaker Dollar. Prices at $1,780 an ounce on Thursday, giving back some gains from the previous session.
    • The dollar lower renewed global recession fears, while investors awaited more cues about the trajectory of US Federal Reserve rate hikes.
      • Markets are expecting the Fed to deliver a more moderate 50 basis point rate hike next week after raising its key rate by 75 basis points in the past four meetings.
      • However, the likely peak for rates remains highly uncertain as the release of surprisingly strong US employment,
      • services and factory data spurred bets that the Fed will tighten further and keep them higher for longer.
      • Higher interest rates dampen gold’s appeal to investors as they raise the opportunity cost of holding non-yielding bullion.
  • The dollar held above 105 on Thursday, remaining up so far this week and benefiting from risk-off sentiment as renewed recession fears gripped financial markets.
    • The greenback was also being supported by bets that the Federal Reserve will raise interest rates further.
    • Investors now look ahead to US consumer inflation data next week, as well as the Fed’s policy meeting where it is expected to deliver a more moderate 50 basis point hike.
    • The dollar held its ground against the euro, sterling and the yen, while it gained against most emerging currencies.

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