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Morning Wrap

11 August 2023

Good Morning

The ZAR reversed recent losses after US CPI printed lower than expected.

Market Movement Today:

The ZAR retraced Wednesday’s losses to reach R18.6500 after US CPI missed to the downside.

  • The Dollar losing ground after yields briefly dropped below 4%.
  • The index falling below 102, after CPI indicated a slowdown in price pressures that could place a hold on the Fed’s hiking cycle.
    • The US dollar was steady on Friday, with the index hovering around 102.5,
      • The annual inflation rate in the US rose to 3.2% last month from 3% in June, below forecasts of 3.3%;
        • while core inflation edged down to 4.7% from 4.8%, also less than expectations of 4.8%.
      • Traders digested US headline inflation reading for July that showed a moderate increase.
  • Risk assets rallied sharply, but reversed as fast after San Francisco Fed president, Mary Daly said the latest CPI numbers do not mean that the central bank can declare a win over inflation.
    • The pressure of issuances from the US treasury department also keeping rates elevated will support the Dollar for now.
    • The news stopping and reversing the rally as yields once again spike to 4.10% resulting in a Dollar rebound.
    • She added that the labour market is not yet balanced, and that rates will have to remain higher for longer.
  • We expect the ZAR to consolidate between 19.0000 to 18.7000 after another volatile week.
  • Trade:  Range Trade

Markets this morning:

  • USDZAR 18.8300
  • DOLLAR 102.39
  • EURUSD 1.0993
  • SP500 4,492
  • GOLD  1917
  • US10YT 4.09%

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