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Morning NOTE

8 September 2022


The ZAR recovered after open at 17.2400 , following a rapid decline to 17.4800 earlier in session.


  • The Rand managed to recover more than 20 cents of losses at the start of trading on Thursday.
    • Earlier on Wednesday the local unit weakened to 17.4800 on the back of a rapid increase in US yields.
  • However, late session Fed commentary resulted in a sharp rebound in risk assets, resulting in a reversal (drop) in US yields and a broad based sell-off in the Dollar.
    • Stocks rallying sharply resulting in improved sentiment to risk assets/currencies  like the ZAR.
    • The US Dollar decline on the back of drop  in treasury yields, with the benchmark US10YT trading at 3.22%, down from 3.35% on Wednesday.
  • The local unit gaining 1.5% at the time of writing.
  • The ZAR for once benefiting from the yield reversal, but also highlighting the correlation and the inter-connectedness of the ZAR to international capital flows.
  • Calendar wise, today’s speech by Jerome Powell, the chairman of the US FED, really the only game in town.
  • The ECB rate decision before will likely cause volatility, but all eyes will remain on the FED Chair 1 hour later.

Significant Market Data



Next week will be dominated by US inflation data.


  • 14h30  : US CPI PREVIOUS 8.5% YOY
  • 14h30  : US CPI CORE PREVIOUS 5.9% YOY

A softer print likely to support Risk assets and likewise a higher print , supportive of the FED policy and we can see some more weakness.


  • This morning we opened SHARPLY stronger on the back of a weaker Dollar.
    • Expect some early import profit taking near the Asian low of 17.2200, with importers likely to take advantage of better levels.
  • Importers are advised to cover between 17.2200 – 17.1600 as the material change will only come from a change in FED policy.
    • Medium term markets are looking ahead to the FED meeting in September (20-21) and this remains the driver of any directional bias for the local unit .

Expected Ranges

  • USDZAR :  Expect a range 17.1500-17.4000
    • Importers 17.2300-17.1500
    • Exporters 17.3200-17.4000
  • EURZAR :  Expect a range of 17.0000-17.5000
    • Importers 17.2300-17.0000
    • Exporters 17.3500-17.5000
  • GBPZAR :  Expect a range of 19.7300-20.0500
    • Importers 19.7800-19.7300
    • Exporters  19.9700-20.0500


  • USDZAR 17.2700
  • EURZAR 17.2800
  • GBPZAR 19.8700


  • COSATU said that it was deeply concerned by Putco’s intention to dismiss 1,000 bus drivers after they embarked on a wildcat strike
    • The bus drivers said that they were not backing down from their unprotected strike at the bus company’s Pennyville offices.
    • Putco suspended its bus services after drivers refused to show up for work last week.
    • About 1,000 employees are expected to lose their jobs after they were given an ultimatum to return to work on Wednesday or face disciplinary action. EWN
  • Locally, The JSE FTSE All Share index fell 1.2 to close at 66,716 on Wednesday.
    • The index led lower by commodity-linked sectors and financials, amid persistent worries about the global economic outlook.
    • Domestically, investors continued to digest the latest GDP data, which showed that South Africa’s economy contracted in the Q2.
    • The country’s worst-ever power cuts continues to place the economy on the back foot. BLOOMBERG
  • Former ANC deputy president Kgalema Motlanthe has once again warned his party of losing favour with the electorate.
    • The former leader, said that December’s national conference must address how corrupted the internal contest has become.
    • He is currently heading up the ANC’s electoral commission. EWN
  • The City of Tshwane has cut power to more than 400 homes on a Pretoria golf estate.
    • The homeowners owe the City more than R16 million due to illegal electricity connections.
    • The crackdown comes as the City attempts to settle its R1.6-billion debt with Eskom. News 24


  • US markets extended a rebound in afternoon trading on Wednesday.
  • The benchmark Dow adding more than 400 points, and both the S&P 500 and the Nasdaq over 1.5%.
    • The rally sparked by a decline in Treasury yields and a sharp fall in oil prices.  
    • The yield on the 10-year Treasury note fell below 3.3%, halting a rally toward multiyear highs while crude markets dropped to over 7-month lows.
  • Investors seemed relieved after Fed Vice Chair Lael Brainard warned about the risk of interest rates going too high.
    • She also reassured markets that the central bank would continue fighting inflation for as long as needed.


  • The 10-year US Treasury note yield declined to 3.23%, , as investors reassessed the outlook for monetary policy as the Federal Reserve seeks to rein in soaring inflation.
    • Comments by Fed speakers providing some relief but the only speech of significance will be Powell this afternoon.
    • The FOMC  hiking interest rates further even as growth slows.
    • The labour market has remained robust and remains supportive of FED policies.  
    • Rate markets are now pricing another supersized 75 basis-point interest rate hike in September.

Rate Hikes

  • Earlier markets witnessed another jumbo interest rate hike from the Bank of Canada.
  • The BOC  raised the target for its overnight rate by 75bps to 3.25%, pushing borrowing costs to the highest since 2008.


  • The Dow added 435 to 31,591
  • The SP500 added 71 to 3,979
  • The Nasdaq rallied 246 to 11,791


  • Asian markets rallied strongly following a rebound on Wallstreet.
    • In Japan, the Nikkei 225 rallied 2.31% to close at 28,065, following a broad rebound on Wall Street.
      • The move on the back of a pullback in the dollar and Treasury yields.
      • Investors also shrugged off hawkish commentary from some US Federal Reserve officials, while remaining cautious about recession risks and rising interest rates.
      • Moreover, markets continued to track sharp declines in the yen, as a weaker currency boosts the profits of export-heavy Japanese companies
    • In Australia, the ASX 200 jumped 1.77% to close at 6,849 on Thursday, rebounding from seven-week lows, as Australian technology stocks tracked a rally in US peers amid a pullback in the dollar and Treasury yields.
      • Financial stocks advanced as well, with the “Big Four” banks rising between 1.1% to 2.8%.
  • Oil Prices Tumble More Than 5%.
    • Oil prices fell about 5% to their lowest level since January, with WTI trading below $82 per barrel amid persistent concerns about sluggish demand and a dollar surge.
    • Weak customs data from top importer China and renewed coronavirus-induced restrictions in several cities threatened further economic damages and subdued fuel consumption.
    • On top of that, lingering global growth concerns amid anticipation of an extended period of tightening financial conditions continued to rattle sentiment.
    • Meanwhile, OPEC+ unexpectedly agreed to cut output by 100,000 barrels a day from October, with Saudi Arabia signalling further action.
  • Gold recovered after a fall in the US dollar.
    • Gold prices rallied strongly to open above $1,720/oz, as caution dominated sentiment ahead of Jerome Powell’s speech and the ECB’s interest rate decision.
    • Powell will speak at the Cato Institute conference later in the global day, offering what could be his last public remarks until the Sept. 20-21 policy meeting.
    • Elsewhere, the ECB is expected to deliver a 75 basis point rate hike later today, pushing borrowing costs to the highest since November 2011 .
    • The ECB continues to try get inflation under control despite a deepening energy crisis that heightened recessionary risks.
    • Gold is trading less than 3% above its lowest levels in over two years, having also lost its shine as a hedge against inflation and economic uncertainty as rising interest rates dented bullion demand.
  • The US dollar fell sharply to trade below 110 on the back of a fall in US yields.
    • The Greenback hovering close to a 20-year high hit in the previous session, as investors wait Powell’s speech for more clues on the central bank’s rate hike path.
    • Earlier Fed Vice Chair Lael Brainard stressed the need to bring rates to restrictive levels to get inflation under control.
    • Markets are currently leaning towards another 75 basis point rate hike at this month’s meeting, which would bring the fed funds rate to 3%-3.25%.
    • Meanwhile, traders also await the European Central Bank’s policy decision later today, where it is expected to move more aggressively to tackle inflation despite mounting recession risks.

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