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Morning NOTE

9 December 2022


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


The Rand remained well bid ahead of today’s US PPI data, as it benefits from the drop in the Dollar.

  • Markets pricing 50 bps for the Fed next week  and this resulting in a drop in the Dollar across board.
  • The Dollar losing ground against the Euro at 1.0570 / Yen 136.35 and Pound 1.2206.
  • Gold also advancing to $1800.oz as well as the US10YT at 3.45% 
  • The ZAR ignoring SA factors as Eskom loadshedding intensifies and deeply affects the SA economy
    • STATS releasing Q3 SA manufacturing QoQ at -6.3% , more than the -1.1% expected.
    • Markets now awaiting today’s  US PPI DATA to determine the Fed’s rate path as well as the directional guidance for the Dollar.
    • Eskom : stage 6  continues and FX markets focusing solely on US interest rates.
  • The SA  10-year government bond yield traded at 10.5%, down from a 31-month high of 10.9% hit on December 1st.
  • Demand helped by President Cyril Ramaphosa winning the governing ANC’s  party’s backing over the “Farmgate” scandal.

Significant Market Data:



  • The ZAR remains well bid on the back of a weaker Dollar as global markets ignore SA’s power crises.
    • SA manufacturing data showing a sharp contraction as the country remains at stage 6.
      • But traders ignoring the SA story and
        • Markets remain solely focussed on a drop in US yields and the support of risk assets.
    • The SP500 and Euro all rallying as the US10YT traded at 3.45%
    • The USDZAR however finding support ahead of the 17.0000 as we await today’s US PPI data.
      • Markets are pricing for lower and this could see a stronger ZAR.
    • A stronger PPI would send the ZAR weaker and likewise a weaker than expected print will send the ZAR stronger below  R17/$.
  • Trade :  Range trade ( before the DATA)
    • Like yesterday BUY ahead of 17.0000 &
    • SELL 17.1800-17.2600
  • Nb: If the US Rate cycle slows down we expect a stronger ZAR in 2023.

Expected Ranges

  • USDZAR :  Expect a range 17.0200-17.260
    • Importers 17.1000-17.0200
    • Exporters 17.180-17.2600
  • EURZAR :  Expect a range of 17.9800-18.2500
    • Importers 18.0700-17.9800
    • Exporters 18.1600-18.2500
  • GBPZAR :  Expect a range of 20.8100-21.1700
    • Importers 20.9300-20.8100
    • Exporters 21.0500-21.1700


  • USDZAR 17.1300
  • EURZAR 18.1100
  • GBPZAR 21.000


  • Minister of Public Enterprises,  Pravin Gordhan has apologised to the nation for the impact load shedding is having on the country.
    • Gordhan says he has instructed Eskom’s board and management, to get the country out of Stage 6 load shedding, as soon as possible.
    • The minister says the frequency of the breakdowns being experienced by the power utility can be ascribed to an element of malfunctioning within its systems.
    • But possible sabotage is not being ruled out in this latest round of breakdowns at six of Eskom’s power stations. News24 


  • Eskom said that it would stabilise the country’s electricity grid before a unit at Koeberg nuclear power station could be shut down.
    • The parastatal said that the outage was now planned for Saturday.
    • Eskom’s acting chief nuclear officer, Sadika Touffie, highlighted why it was important to shut the unit down.
    • “We will need to shut the unit down to refuel the reactor for the next operating cycle. 
    • it one will be taken offline for maintenance and refuelling and that 920 megawatts of electricity would be unavailable due to the unit being taken offline. EWN

Load shedding and the economy

  • Experts predicted that the rolling blackouts could  cripple food security and businesses,
    • with agriculture, mining and manufacturing among the sectors that might have to brace for tougher times ahead.
  • Efficient Group economist Dawie Roodt said that the government needed to find urgent interventions.
    • He said “We need to give Eskom more money to buy more diesel in the short term.”
    • Economists believe that finding alternative energy sources could help keep South Africa’s economy afloat. EWN 

Bad weather in Gauteng continues

  • The South African Weather Service warned of more rain in Gauteng until at least Sunday,
  • This on the back of  GP emergency services responding to more calls about flooded roads in Joburg on Friday morning.
  • Friday’s incidents come while some residents are still trying to repair damage caused by a hailstorm on Monday.
  • The storm uprooted trees, drenched people’s homes and swept debris across parts of Joburg. IOL


  • In regular trading on Thursday, the S&P 500 climbed 0.75% , while the Dow and Nasdaq gained 0.55% and 1.13%, respectively.
  • US stock futures held steady in Asian trade on Friday after the major averages snapped a losing streak,
    • as investors look ahead to the US PPI report that could throw light on the state of inflation.
  • Futures contracts tied to the three major indexes were all near breakeven.
    • Investors now await the November PPI report and consumer sentiment data on Friday,
    • while consumer inflation data and the Federal Reserve policy meeting will take the spotlight next week.


  • The yield on the US 10-year, bottomed below 3.5% as bets increased 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.  Bloomberg


  • The Dow added 183 to 33,781
  • The SP500 added 29 to 3,963
  • The Nasdaq  added 123 to 11,082


Asian markets broadly higher on the back of Risk on sentiment following a rally in New York as positive risk sentiment sends stocks higher on Wall street.

  • In Japan, the Nikkei 225 jumped 1.18% to close at 27,901, rising from one-month lows and tracking Wall Street higher.
    • Investors continued to assess the outlook for growth and the trajectory of monetary policy.
    • Technology stocks led the charge, with strong gains from SoftBank Group (1.2%).
  • Earlier the Japanese yen appreciated to around 136 per dollar, heading back to its highest levels in four months amid a general dollar weakness.
    • Traders waiting for  key US inflation data and the Federal Reserve’s rate hike decision next week.
    • Meanwhile, Bank of Japan Governor Haruhiko Kuroda recently stated that it was too early to discuss the chance of reviewing the central bank’s monetary policy framework.
  • In Australia, the ASX 200 rose 0.53% to close at 7,213.
    • Australian shares also tracked gains on Wall Street overnight as investors continued to assess the outlook for growth and the trajectory of monetary policy
    • Gains in the technology sector and Heavyweight miners also advanced on firmer iron ore prices, including BHP Group (2.7%), Rio Tinto (2.3%). Reuters

US Dollar

  • The US dollar weakened to 104.5 on, sliding for the third straight session as investors cautiously awaited US producer inflation and the expectations for monetary policy.
    • Growing recessionary fears in the US also weighed on the currency
    • The PPI data for November is due for release later today, while the CPI data is due next week, one day before the Federal Reserve’s policy meeting.
    • The Fed is expected to deliver a 50 basis point rate hike next week and traders will be watching for signs on whether the central bank is getting ready to pause or continue tightening.
    • Investors are also bracing for monetary policy decisions from the European Central Bank and the Bank of England next week. FX news

Crude oil

  • WTI crude futures stabilized around $72 per barrel on Friday.
    • Prices are sharply lower as renewed recession fears gripped financial markets, overshadowing optimism around China’s loosening Covid curbs and persistent supply-side concerns.
      • The US oil benchmark is down nearly 10% so far this week, having been pressured throughout the period by economic fears.
    • This after a chorus of top executives in the US sounded the alarm on a potential recession next year.
      • Tightening financial conditions also weighed on markets, with the US Federal Reserve expected to raise interest rates further and keep them higher for longer.
      • Meanwhile, investors cheered easing Covid restrictions in China that sparked hopes of a wider economic reopening that could boost demand in the world’s top crude importer.
    • The shutdown of the Keystone pipeline also added to the highly uncertain supply outlook, with investors still assessing the impact of the latest sanctions on Russian oil. Gulf energy news


  • Gold rose above $1,790/oz, benefiting mainly from the dollar’s weakness as investors cautiously awaited key US inflation data and the Federal Reserve’s policy decision next week.
    • The US PPI due for release later today and the CPI scheduled for next week could shed light on the state of inflation and influence longer-term expectations for monetary policy.
    • The Fed is expected to deliver a more moderate 50 basis point rate hike next week after raising rates by a hefty 75 basis points in the past four meetings,
    • and traders will be watching for signs on whether the central bank is getting ready to pause or continue tightening.  Kitco metals report.

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