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
- 11H00 : SA CURRENT ACCOUNT +R143BN PREVIOUS VS R100BN
- 14H15 : ECB RATES DECISION – EXPECTED +75 BPS
- 15H10 : US FED CHAIR JAY POWELL SPEECH
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 .
- 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.
- 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.