The ZAR endured a volatile session on Friday on the back of comments about the SARB by the ANC as well as the latest NFP report.
- The Rand traded in a 40 cents range on Friday weakening from 17.1500 to reach 17.4300 after comments that the ANC was in favour of nationalizing the SARB.
- The market however swiftly rejected the rumours/comments, as well as a subdued US Jobs report that showed a higher than expected jobs increase but a decline in wages.
- It resulted in a drop in the US 10YT to 3.55% as rates traded speculated the Fed will indeed slowdown in 2023.
- Risk rallied across the board as the SP500 once again hit 3900 and the Dollar index (DXY) slipped to 103.59
- Markets reversing price action after the FED minutes showed a the Fed remained ultra-hawkish, but betting that the data and broader economy no longer supporting this view.
- The ZAR and all other emerging market currencies benefiting and the local unit swiftly retraced to from 17.4300 to 17.0600 (at the time of writing).
- All attention now turning towards the US December CPI report, with the consensus for 6.5% YOY vs 7.1% previous.
- A lower print will be Risk supportive and we can see more ZAR gains at the start of 2023
Data this week
- 13H00 : SA MANUFACTURING PRODUCTION YOY 2.5% CONSENSUS VS 4.1% PREVIOUS
- 16H00 : US FED CHAIR JEROME POWELL SPEAKS
- 15H30 : US INFLATION RATE YOY EXPECTED AT 6.5% VS 7.1% PREVIOUS
- 15H30 : US CORE INFLATION RATE YOY EXPECTED AT 5.7% VS 6.0% PREVIOUS
- 17H00 : US CONSUMER SENTIMENT, WITH 60 EXPECTED VS 59.7 PREVIOUS
Market Movement Today :
- The Rand opening stronger on the back of a weaker Dollar across the board.
- The Buck under pressure following a risk rally, with US 10YT yields indicating room for a softer Fed.
- The 10YT yield falling hard to 3.55%.
- This morning expect some early ZAR weakness, but more on the back of profit taking as Dollar shorts bank profits after a volatile session on Friday.
- A rise above 17.1000 towards 17.1500 will be good USDZAR selling opportunities.
- The ZAR hitting 17.430 on the back of ANC / SARB comments and then reversing sharply following US ISM services and Wage growth data.
- All of this pointing to lower rates if Thursday’s US CPI report confirms a lower print.
- We continue to expect a stronger ZAR in 2023 on the back of a change in Fed policy
- As well as political stability, after the re-election of Cyril Ramaphosa as ANC president.
- TRADE : SELL USDZAR ON RALLIES
- A break below 17.0000 opens up 16.8000
- USDZAR : Expect a range 16.9400-17.2400
- Importers 17.0400-16.9400
- Exporters 17.1400-17.2400
- EURZAR : Expect a range of 18.0900-18.3600
- Importers 18.1800-18.0900
- Exporters 18.2700-18.3600
- GBPZAR : Expect a range of 20.5600-20.8600
- Importers 20.6600-20.5600
- Exporters 20.7600-20.8600
- USDZAR 17.0600
- EURZAR 18.2100
- GBPZAR 20.7200
- ESKOM crises continues as the SOE announced stages 3 and 4 to continue “ until further notice”.
- The power utility continues to struggle as it battles breakdowns, maintenance issues as well as sabotage.
- The ageing power fleet deteriorating at an alarmingly fast rate. IOL
- In addition, it has emerged on the weekend that,
- Eskom CEO Andre De Ruyter survived a murder attempt at his office in Megawatt Park, where he drank a cup of coffee laced with cyanide.
- De Ruyter confirmed the attempt on his life, which took place on Tuesday 13 December 2022.
- It was a day after he submitted his resignation as CEO to the Eskom chairman, Mpho Makwana, but before this became publicly known on 14 December 2022. EWN
- After securing re-election at the ANC’s December elective conference,
- ANC president Cyril Ramaphosa on Sunday promised sweeping initiatives and interventions in a bid to restore public confidence in the beleaguered party’s ability to govern.
- He announced a host of new initiatives as he fights to revive the party itself ahead of the 2024 national and provincial elections. EWN
- The Health Department said it was still gathering information to give a more conclusive report on the newly detected highly transmissible variant of COVID-19 – XBB.1.5
- University of Stellenbosch, Professor Tulio de Oliveira said in a tweet on Friday that the variant was discovered in the Western Cape,
- following gene sequencing carried out from a 27th of December sample.
- The World Health Organization (WHO) says the sub-variant called xbb. 1. 5 has been detected in 28 other countries with the strain being more dominant in the United States.
- It’s yet to be identified in China, which is undergoing a surge in infections after relaxing strict controls, which limited the effect of previous waves of COVID-19 in the country. NEWS24
- US stock futures edged higher on Monday after the major averages notched their biggest one-day gain so far this year during Friday’s session.
- Markets taking off after a slowdown in wage growth and a surprise contraction in services activity in the US tempered expectations that the Federal Reserve will continue to hike rates aggressively.
- The SP500 trading above 3900 as traders start to warm to the idea of a risk rally in 2023.
- The US 10-year Treasury yield fell by 15bps to 3.6% on Friday, the lowest in three weeks, as investors digested a batch of fresh economic data for hints on the outlook of the Fed’s monetary policy.
- US wage growth unexpectedly slowed in December and earnings for previous months were revised sharply lower.
- Also, ISM data showed that factory orders contracted more than expected, while service activity unexpectedly declined.
- NB ; the Service sector remained a concern for various Fed governors, including Ralph Bostic of Atlanta, a furter decline could be significant for future Fed cycles.
- The Dow gained 700 points to 33,630
- The SP500 added 86 to 3,895
- The Nasdaq added 264 to 10,569
- The US dollar index slipped toward 103.5 on Monday, extending a sharp decline in the previous session.
- Weaker-than-expected US data released last week sparked hopes that the Federal Reserve would slow the pace of its interest rate hikes.
- The Dollar weakened across the board as risk sensitive currencies like the Aussie and Kiwi all gained against the buck.
- The drop in the dollar under pinned by the drop in US yields as inflation expectations continue to drop. Fx news
- Asian equity markets jumped on Monday, tracking Wall Street higher.
- US data showed a slowdown in wage growth and a surprise contraction in services activity, resulting in tempered expectations that the Federal Reserve will continue to hike rates aggressively.
- China’s continued reopening also bolstered the outlook for the global economy. Shares in Australia, Hong Kong and China rose, while Japan is closed for a holiday.
- In Japan, the Nikkei 225 rose 0.59% to close at 25,974, rising for the second straight session as investors scooped up shares of beaten-down Japanese companies. Reuters
- Crude oil WTI traded above $74 /bl, rebounding further from three-week lows.
- Prices supported by hopes of further demand recovery in China and the prospect of a less aggressive monetary tightening from the Federal Reserve.
- Guo Shuqing, party secretary of the People’s Bank of China, said on Sunday that China’s economic growth will quickly rebound and return to its “normal” path.
- This as the government provides more financial support to households and private companies to help them recover from the Covid-induced slump.
- Top hedge fund manager Pierre Andurand suggested that oil prices could exceed $140/bl year if Asia fully reopens after Covid-related lockdowns, as reported by Bloomberg.
- In the US, a slowdown in wage growth and a surprise contraction in services activity tempered expectations that the Fed will continue to hike rates aggressively, adding to the bullish case for oil. Gulf energy news
- Gold rallied to around $1,880/oz on Monday, reaching its strongest levels in eight months.
- Bullion higher on the back of general dollar weakness, as a slowdown in wage growth and a surprise contraction in services activity in the US tempered expectations.
- ISM data also showed that US services sector activity unexpectedly contracted in December at the steepest pace in 2-½ years amid weakening demand.
- Meanwhile, minutes of the FOMC’s December meeting showed that policymakers committed to pushing rates higher
- and holding them at a restrictive level until there were clear signs that inflation was easing. Kitco metals report