The ZAR remains under pressure and traded following the Eskom labour grid-lock as the country remains in Stage 6.
- Yesterday, the ZAR retreated further on the back of ESKOM stage 6.
- The local unit hitting 16.4700 as the economy desperately struggles along with rolling black-outs.
- With SA PPI once again higher than expected at 14.7%.
- And we think that any positive news out of ESKOM, will likely to see a swift return for the local unit.
- Once again this will dominate the session.
- Lower US rates will be ZAR supportive.
- Also US10YT traded below 3.00% at 2.95%, as investors remain worried about a recession in the world’s largest economy.
- This morning we opening near the weaker end of the ZAR range with stocks down in Asian trading adding to negative Risk sentiment.
- A break of yesterday’s high 16.4700 targets 16.5200 before 16.6700
- Likewise a break of 16.2500 (Asian $ low), opens up a swift return back to the figure R16/$.
- USDZAR : Expect a range 16.1100-16.5200
- Importers 16.2500-16.1100
- Exporters 16.4000-16.5200
- EURZAR : Expect a range of 16.8900-17.1800
- Importers 17.0300-16.8900
- Exporters 17.1000-17.1800
- GBPZAR : Expect a range of 19.6400-20.0100
- Importers 19.7500-19.6400
- Exporters 19.8700-20.0100
- USDZAR 16.3600
- EURZAR 17.1100
- GBPZAR 19.8200
STAGE 6 : Economists warn is going to hit the economy hard.
- While the actual economic impact is yet to calculated, economists and business leaders are already warning that the toll will run into billions of Rands.
- Additional ramifications such as lost investment, a negative impact on SA’s already sub-investment grade credit rating and deteriorating business- and consumer confidence levels. Moneyweb
- Eskom increased its wage increase offer to 7%.
- The company and unions were hopeful that it would be enough motivation for the workers but not everyone appears convinced as the utility records high levels of absenteeism.
- Eskom and union negotiators are expected to return to the central bargaining forum on Friday morning to continue talks.
- However, both sides go into the fifth round of talks burdened by defiant workers who still refuse to get back to their posts. EWN
- SA’s Trade balance recovered with a strong showing on the country’s export potential.
- Exports advanced 17.8% to ZAR 179.46 billion, mainly due to higher shipments of mineral products (35%), base metals (28%), chemical products (21%) and vegetable products (24%).
- Meanwhile, imports rose at a softer 10.9% to ZAR 151.11 billion, driven by mineral products (11%). source: South African Revenue Service
- Opposition political parties continued to press President Cyril Ramaphosa to address the nation on the prevailing power outages in the country.
- In addition, they also want an urgent debate focused on the latest bout of load shedding.
- South Africa braved alternating stage 4 and stage 6 power cuts this week – prompting opposition parties to demand more action from Parliament and Ramaphosa.
STAGE 8 ? energy analysts warn of a disastrous stage 8 if the crises is not resolved soon.
- The yield on the US 10-year fell below the 3% mark, retreating to levels not seen in three weeks.
- Investors rushed to safe-haven assets due to persistent fears that the Fed will tip the US economy into a recession as it attempts to rein in inflation.
- Weak economic data this week fuelled those concerns further, namely signs of a slowdown in consumer spending, with morale among consumers at a 16-month low.
- Also worse-than-expected GDP figures.
- On the other hand, the core PCE Price Index inflation, the preferred gauge of inflation by the Fed, eased to a six-month low of 4.7 percent in May 2022.
- The Fed preferred inflation gauge indicating that price increases could be slowing.
- The Dow fell 253 to 30,775
- The SP500 fell 33 to 3,785
- The Nasdaq fell 149 to 11,028
- image : Trading economics
Asian markets starting the month on the back foot with heavy losses across the board.
- Japan leading the way, with the Nikkei 225 down 1.98% to around 25,885, extending losses in the previous session.
- Technology stocks led the market lower, with sharp losses. TE
- Latest data also confirmed a weak manufacturing PMI reading in Japan for June, while the country’s unemployment rate nudged higher in May.
- Sentiment among Japan’s large manufacturers worsened in the April-to-June period, according to the BOJ ‘s quarterly tankan business sentiment survey.
- Traders citing, a slew of downbeat economic data weighed on investor sentiment.
Brent crude futures held around $109/bl on Friday and were on track to decline for the third straight week amid concerns that a potential recession will dampen energy demand.
- Data this week showed weakness in US consumer spending, which is by far the biggest contributor to gross domestic product.
- Recent weakness in oil prices also came despite signs that the physical supply remains very tight.
- On Thursday, OPEC+ agreed to stick to its output strategy after two days of meetings, increasing production by 648,000 barrels per day in July and August.
- US President Joe Biden will travel to the Middle East later this month to urge Saudi Arabia and the UAE to increase supplies further.
- However, reports earlier this week suggested the two major producers are at, or very close to, near-term capacity limits. Energy News
Gold weakened toward $1,800 an ounce on Friday, hovering at its lowest levels in nearly seven weeks as a strong dollar continued to dampen bullion demand.
- Also, a broad sell-off in risk assets forced investors to liquidate gold positions to offset losses in other holdings.
- Fed policymakers indicated this week a strong commitment to bringing down inflation even at the risk of a recession, signalling another 75 basis point rate increase in July.
- Although gold is widely considered as a hedge against inflation and economic uncertainties, higher interest rates raise the opportunity cost of holding non-yielding bullion. Kitco metals
The US dollar moved higher, up to around 104.85 on Friday and was set to gain for the week.
- Supported by the FED’s firm hawkish stance and escalating risks of a global recession.
- Fed policymakers indicated this week a strong commitment to bringing down inflation even at the risk of a recession.
- Another 75 bpts in July.
- The dollar also benefited at the expense of commodity currencies and other risk assets from fears of a global downturn. FX news