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Morning Wrap

7 August 2023

Good Morning

The ZAR recovered after Friday’s US jobs report printed lower than expected resulting in a drop in the Dollar.

Market Movement Today:

The ZAR gained more than 2% to reach 18.3600 after Non-farm payrolls printed lower than expected.  

The local unit, opening weaker as traders turn attention to Thursday’s US CPI report.

  • On Friday, the Dollar rally stalling after US yields dropped sharply to reach 4.06%. 
    • Payrolls lower, but Wages higher as well as a drop in unemployment to 3.5%, remains supportive of the Dollar.
  • This week is dominated by US inflation data due on Thursday and it will likely set the next directional leg for the Dollar.  
    • US inflation expected at 3.3% YOY vs 3% previous.
      • Analysts citing a removal of the base effects as well an increase in energy and food prices.
      • A higher number will likely send the Dollar higher, removing any chances of a Fed pause/cut later in the year.
      • If any it would support further Fed hikes.
  • We expect the ZAR to consolidate around the 18.5000 level, after the benign NFP report, with a risk of further weakening if US inflation prints higher.
  • Trade :  BUY USDZAR on DIPS

Markets this morning:

  • USDZAR 18.5000
  • DOLLAR 102.31
  • EURUSD 1.0973
  • SP500 4,492
  • GOLD  1937
  • US10YT 4.08%

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