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Morning NOTE

1 June 2022


The ZAR weakened following profit-taking on short Dollar positions, following weaker Risk session.


  • The Rand weakened to hit an overnight low of 15.7000, following a risk off session across the board.
    • Equity markets retreating on the back of higher oil prices and the potential for even higher inflation.
    • In addition, following a meeting between Joe Biden and Jerome Powell, Biden concluded that he respects the independence of the Fed and would not interfere in the work.
    • He added, that his job as president is to give Fed officials “the space they need to do their job.“
  • Following the meeting the Dollar regained upside momentum as treasury yields rose and also;
    • The expectations the ECB will need to raise interest rates faster after a raft of inflation reports from the Eurozone, Germany, France, Italy and Spain came in above market expectations.
      • The annual inflation rate in the Euro Area surged to a fresh record high of 8.1% in May, up from 7.4% and above market expectations of 7.7%.
      • Elsewhere, the EU agreed to ban Russian oil imports brought in by sea, but there’s a temporary exception for pipeline imports, to appease countries such as Hungary who opposed a full ban.
  • All of the above adding to lower risk-off sentiment, even though SA unemployment surprised to the downside.
    • STATS SA reporting 34.5% vs 35.3% previous, however the Balance of Trade showed a decline to R15.49bn for April.
    • The trade surplus declined from an upwardly revised ZAR 47.20 billion in the previous month.
    • Exports slipped by 19.1% from a month earlier to ZAR 151.79 billion.
      • Amid declines across all main categories, notably mineral products (-26%), base metals (-27%) and precious metals & stones (-18%).
  • Today : Expect some more ZAR more range bound trading as market flip between Risk-on/off ahead of Friday’s NFP report.
    • Higher than expected EU inflation and the lower US stocks, placing pressure on the local unit.
    • With no new data on the cards until Friday, expect some ZAR gains towards 15.5000.
    • This will present good opportunities for importers to exact cover ahead of Friday’s data.
    • A break of 15.7000 targets 15.8600
  • USDZAR :  Expect a range 15.4600-15.8200
    • Importers 15.6000-15.4600
    • Exporters 15.7000-15.8200
  • EURZAR :  Expect a range of 16.6100-16.9100
    • Importers 16.6800-16.6100
    • Exporters 16.8200-16.9100 
  • GBPZAR :  Expect a range of 19.5200-19.8600
    • Importers 19.6000-19.5200
    • Exporters 19.7500-19.8600
  • USDZAR 15.6500
  • EURZAR 16.7500
  • GBPZAR 19.6900


Fuel hikes

  • The government said consumers should brace themselves as high fuel prices are here to stay due to the ongoing global energy crisis.
  • At midnight on Wednesday, the price of petrol went up by between R2.33 and R2.43 a litre, while the price of diesel increased by between R1.07 and R1.10.
  • Government also announced the extension of the R1.50 fuel levy relief for another two months.
  • The department’s Tseliso Maqubele said this is the best government could do in the midst of a global economic war. EWN


  • South Africa’s unemployment rate eased to 34.5% in the first quarter of 2022, down from a record high of 35.3% in the previous period.
    • The number of unemployed persons decreased by 60 thousand to 7.9 million, employment rose by 370 thousand to 14.9 million and the labour force went up by 310 thousand to 22.8 million.
    • The expanded definition of unemployment, including people who have stopped looking for work, was at 45.5%, down from 46.2% in the fourth quarter.
    • The youth unemployment rate, measuring job-seekers between 15 and 24 years old, fell to 63.9% in the first quarter of 2022.
    • It was the lowest in a year, from a record high of 63.5% in the last quarter. source: Statistics South Africa



  • Wallstreet traded down in the final day of trading for May 2022.
    • This morning US stock futures edged higher after a weak overnight session on Wall Street, as investors continued to speculate on how aggressive monetary tightening will need to be to fight inflation.
    • The moves came after a down day for stocks, with the Dow falling 0.67%, while the S&P 500 and Nasdaq Composite lost 0.63% and 0.41%, respectively.
    • The Dow and S&P 500 recouped most of their losses towards the end of May to end the month little changed.
  • Meanwhile, the tech-heavy Nasdaq Composite underperformed, shedding more than 2% in May.
  • US 10 Year was 2.88 % on Wednesday June 1, according to over-the-counter interbank yield quotes for this government bond maturity.
  • President Joe Biden huddled on Tuesday with Federal Reserve Chairman Jerome Powell on the U.S.’s fight against high inflation.
  • After writing in a Wall Street Journal op-ed that the central bank “has a primary responsibility to control inflation” and promising not to meddle in its operations. source: U.S. Department of the Treasury
  • The Dow declined 222 to 32,990
  • The SP500 fell 26 to 4,132
  • The Nasdaq  declined 49 to 12,081
Futures Trading:
  • image : Trading economics
  • Asian markets trading higher, with the Japanese Nikkei leading the way.
    • The Nikkei 225 climbed 0.65% to close at 27,458, hitting the highest in more than a month, as Japan takes gradual steps toward a wider reopening of its borders.
      • The country doubled the daily cap on the number of visitor arrivals to 20,000 on Wednesday, among other easing measures, while opening up to tourists from June 10.
      • Meanwhile, investors digested Japanese manufacturing data which fell to a three-month low in May due to supply chain disruptions, while nerves about inflation kept markets on edge.
        • Consumer, manufacturing and financial stocks led the advance.
    • In Australia, ASX 200 Index rose 0.32% to close at 7,234 on Wednesday, recouping some losses from the previous session, boosted by a rally in financial stocks.
      • Investors also digested Australian GDP data which slowed to 0.8% in the first quarter of the year, but still came in higher than the 0.5% growth forecast.
  • Crude oil traded to $115/bl a sharp intraday reversal that saw the benchmark end lower in the previous session.
    • Traders weighed an EU ban on Russian oil and Shanghai’s reopening against reports OPEC may suspend Russia from a production deal.
    • Oil prices initially rallied on Tuesday after EU leaders agreed in principle to cut 90% of Russian oil imports by the end of this year, as well as in anticipation of Shanghai’s reopening after a two-month lockdown.
    • However, reports that some producers were considering suspending Russia’s participation in a production deal of OPEC+, which could pave the way for other producers to pump more crude into markets.
    • If approved, some Gulf members had begun planning for an output increase sometime in the next few months, according to WSJ. Energy news
  • Gold declined towards $1,830/oz hitting its lowest in nearly two weeks and remaining under pressure from a rising dollar and Treasury yields.
    • The outlook for interest rates and the dollar still present major headwinds for bullion, as investors continue to speculate on how aggressive monetary tightening will need to be to fight inflation.
    • Minutes of the last FOMC meeting showed that most participants believed that 50 basis point rate hikes would be appropriate at each of the next two meetings.
    • The yield effect remains clear and the correlation remains in place.
  • The US Dollar increased 102 on Wednesday, extending gains in the previous session, amid rising Treasury yields and as worries over a further acceleration in global inflation drove safe-haven demand for the greenback.
    • US Treasury yields have been climbing this week after Fed Governor Christopher Waller said the central bank should be prepared to raise interest rates by 50 basis points at every meeting from now on until inflation is decisively curbed.
    • President Joe Biden also assured Fed Chair Jerome Powell in a meeting on Tuesday that he will give the central bank the space and independence to address inflation as it sees fit.
  • Germany : with rising inflation and declining economic output and the potential for higher interest in the Eurozone.
    • German equities remain on the defensive.
      • German retail sales slumped 5.4% mom in April, the biggest fall in a year and much worse than market forecasts of a 0.2% decline.
      • Traders citing rising costs, specifically for food weigh heavily on consumer spending.
      • Food prices saw a significant increase, pushing food sales down at a record pace. Compared to the same month last year, retail sales edged 0.4% lower.
      • Stagflation a concern as the effect of the WAR continues to affect growth in the EU.
COVID-19 SOURCE Cases / Deaths / Recoveries
  • World  532,938,810 / 6,313,899 / 504,012,345
  • USA 85,901,797 / 1,.031,613 / 82,239,607
  • SA 3,957,777 / 101,190 / 3,812,563
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