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Morning NOTE

 9 February 2023


The ZAR continued to weaken on the back of negative Global Risk sentiment and portfolio hedging ahead of the SONA.


The Rand continued to trade lower, following more hawkish comments from Fed officials and bond portfolio hedging.

  • The local unit declining more than 2% to reach 17.8200, before finding some support .
    • Local traders from the various investment banks also citing “bond holder” portfolio hedging ahead of tonight’s SONA address,
      • As well as the Fed’s ultra-hawkish comments.
  • Investors waiting on Rampahosa to sketch a plan that gets SA out of the current load shedding quagmire, and not more of the same.
    • Investor confidence also being shaken after numerous companies reported the severe cost of their energy bills,
      • This all since stage 6 was implemented at the end of 2023.
    • Thus, South Africans hoping for solutions from Rampahosa and the Bond  portfolio hedging is to bet against another “nothing speech”.
  • Fed governors continue to push for rates above 5% in the battle against inflation.
    • And Friday’s Jobs report being used as ammunition to drive this narrative.
    • Risk assets like the SP500 declining as well high yielding emerging market FX like the ZAR.
  • The US DOLLAR AT 103.26 / SP500 4,135 / US 10YT 3.62% /  USDZAR 17.7100

Data this week 




  • 09H00 : UK  GDP 0.4% EXPECTED YOY VS 1.9% PREVIOUS

Market Movement Today:

  • Local traders citing bond portfolio hedging as a driver as markets anxiously awaits the SONA address by Cyril Rampahosa.
    • Investors looking for clues and concrete solutions from Rampahosa to get SA out of the current load shedding debacle.
  • ZAR support this morning, and traders citing improved risk appetite in Asian markets as stocks rallied from overnight lows in New York.
    • The Dollar however remains well bid as traders continue to fret about Fed governors and hawkish speak.
  • This morning we opening 10 cents stronger off yesterday’s lows of 17.8200.
    • We are also on top of Monday’s high and a break inside the range, likely to put pressure on weak longs above 17.8000.
    • NB: We don’t anticipate aggressive moves ahead of the SONA address.
  • Traders will also look to the mining and manufacturing data at 11h30 and what effects load shedding had on the sector.
    • Especially after Rampahosa stressed the importance of the sector at the mining indaba in Cape Town on Tuesday.
  • Abroad;
    • This afternoon’s US Weekly claims also likely to add some market volatility, especially after last week’s NFP surprise.
    • The theme however remains inflation, and it would be a mistake not to remind the reader.
    • It appears of a case of  “NOT SEEING THE FOREST FROM THE TREES”
      • i.e. focussing on details (jobs) and not the big picture ( declining inflation).
    • The latter likely to dominate and will force a pivot from the Fed.
  • A confirmed break below 17.7000  targets 17.5500 and through 17.800 target 18.0000
  • TRADE :  SELL USDZAR on rallies.

Expected Ranges:

  • USDZAR :  Expect a range 17.5800-17.8800
    • Importers 17.6800-17.5800
    • Exporters 17.7800-17.8800
  • EURZAR :  Expect a range of 18.8700-19.1400
    • Importers 18.9600-18.8700
    • Exporters 19.0500-19.1400
  • GBPZAR :  Expect a range of 21.2700-21.5400
    • Importers 21.3600-21.2700
    • Exporters 21.4500-21.5400


  • USDZAR 17.7100
  • EURZAR 19.0100
  • GBPZAR 21.4100



  • Ahead of the Rampahosa’s SONA address, Gauteng residents called on him to sympathise with their needs for basic services.
    • Ramaphosa would be addressing a nation that has been demoralised by loadshedding,
      • frightening levels of unemployment, poverty, and the collapse of water and sewerage infrastructure.
    • Municipal services such as water supply, waste water treatment, and sewerage infrastructure have been the hardest hit by Eskom’s inability to keep the lights on. EWN
  • Agri SA has called on President Cyril Ramaphosa to declare the agriculture an essential service amid the country’s worsening power crisis.
    • Farmers, who need power to irrigate their crops, are battling to keep up.
    • Meat and dairy farmers have also been hit hard. EWN
  • The City of Cape Town has written an open letter to President Cyril Ramamphosa on the devolution of a number of competencies.
    • This is ahead of Ramaphosa’s State of the Nation Address (Sona) on Thursday.
    • The city previously wrote a letter to the president early in 2022 requesting full control of operations on energy, policing and rail services.
    • The Sona is the right platform for the president to announce the devolution of these services to well-run cities, said the City of Cape Town. EWN

COAL for exports?

  • With coal in hot demand around the world, last week two SA companies announced major coal projects ahead of the Mining Indaba industry forum that kicked off in Cape Town on Monday.
  • JSE-listed Thungela plans to acquire a majority interest in Ensham coal mine in Australia.
    • and Canyon Coal, part of private investment company Menar, has started building a new 1.2 million ton a year coal mine at Hendrina in Mpumalanga. MONEYWEB
  • Anglo platinum said  payouts to decline as SA power outages hit.
    • Power outages could cut SA’s output of platinum-group metals by a fifth this year, after an estimated reduction of 10% in 2022.
    • Chief Executive Officer Natascha Viljoen said in an interview, that returns will be softer and not match those of 2021. Moneyweb


  • US stock futures stabilized on Thursday after the major averages sold off during Wednesday’s regular session.
  • The risk off sentiment continued as various  Federal Reserve officials reiterated their commitment to bringing down inflation.
  • Futures contracts tied to the three major indexes drifted flat to slightly positive.
  • On Wednesday, the Dow fell 0.61%, the S&P 500 dropped 1.11% and the Nasdaq declined 1.68%.
  • New York Fed President John Williams saying prior Fed indications that would see rates rise to 5.1% remain accurate. BLOOMBERG


  • The yield on the US 10-year remained 3.6% after more hawkish comments from Fed officials.
  • The strong gains on the Friday’s NFP as well as further comments from Fed officials driving the current RISK OFF TRADE.
  • The Labour Department’s closely watched employment report showed that job growth accelerated sharply in January.
  • Investors now see the Fed raising the fed funds rate to 5%-5.25%, with the world’s most influential central bank delivering a 25 bps hike in March and May before pausing.
  • Still, Wall Street and the Fed are again in a standoff on the future path of interest rates. CNBC


  • The Dow declined 207 to 33,949
  • The SP500 fell 46 to 4,117
  • The Nasdaq fell 203 to 11,910

:  image: Trading economics


The US dollar

  • The Dollar remained supported above the 103 index level following more “rate hike“ remarks from various fed governors.
    • Following Jay Powell’s speech to the economic club of Washington, that Disinflation has begun, but that more rate hikes will be needed to bring inflation down to 2%.
      • Various other governors took the “RATES HIGHER FOR LONGER“  baton and ran with it.
    • Markets remain uneasy but data supportive of lower inflation and the Fed will need to re-evaluate sooner rather than later. Forex news
  • Recall :
    • In the final quarter of 2022, Atlanta Fed chief, Raf Bostic, continuously mentioned the lagging effect of monetary policy i.e. at least 18 months.
    • After the Fed’s front loading with aggressive hikes in 2022, we can expect this effect to come through in the market place in 2023,
    • Resulting in an even faster drop-off in inflation. “Some” economists even calling for a cut in Q4 of 2023.
  • Asian markets mixed this Thursday morning , as investors continue to fret over Fed governor comments and the fight against inflation.
    • It’s once again a case of “…not seeing the forest from the trees…” i.e. focussing on the details and not the big picture I.E. inflation is trending downwards.
  • In Japan, the Nikkei 225 fell 0.4% to around 27,480, tracking losses on Wall Street overnight.
    • The losses in New York as more Fed officials reaffirmed their commitment to bringing down inflation.
    • Investors also braced for corporate earnings from major Japanese firms on Thursday including Toyota, Nissan and Nexon.
    • Technology stocks led the market lower, with sharp losses from Tokyo Electron (-1.9%).
  • BUT …
    • In China, the Shanghai index gained 0.8% to around 3,260, rebounding from recent lows as investors bought up shares of Chinese companies with robust outlooks.
      • Investors in mainland stocks also shrugged off the latest commentary from US Federal Reserve officials who reiterated their commitment to fighting inflation with more rate hikes.
      • Growth-oriented consumer and technology stocks led the market higher. Reuters

Crude oil rally.

  • US WTI crude oil  steadied around $78.5/bl on Thursday after rallying in the previous three sessions.
    • Investors digested the latest Federal Reserve commentary and mixed reports on US crude stockpiles.
    • More Fed officials reaffirmed their commitment to fighting inflation with more rate hikes on Wednesday.
      • EIA data on Wednesday also showed that US crude inventories increased last week, in contrast with an API report on Tuesday showing a surprise decline.
    • Supply concerns also supporting a 7% rally in the past three sessions.
      • Traders also assessed the impact of a European ban on seaborne imports and price caps for Russian oil products that came into effect on Sunday.
      • Optimism around a rebound in Chinese demand also aided sentiment. Gulf Energy News


  • Bullion recovered to move towards $1,880/oz.
    • The Yellow metal rebounding further from one-month lows as Fed Chair Jerome Powell’s latest remarks, sounded less hawkish than anticipated.
    • US yields continues to drive Bullion trading, but the yellow metal appears to have found support for the longer term.
    • This after Powell reconfirmed the beginning of disinflationary processes but warned more rate hikes might be needed.
    • Bullion investors becoming more optimistic especially if the inflation trends lower and we have a likely hood of lower interest rates. Kitco Metals report

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