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Morning NOTE

10 June 2022


The ZAR weakened on the back of global Risk-off sentiment after the ECB confirmed a major policy change from neutral to Hawkish.


  • The Rand suffered to reach 15.5200, after speeding towards a strongest level of 15.1600 in early morning traders.
    • Local Rand traders, were however all buyers at the lower 15’s as they all confirmed it was merely a stop-hunt for weak shorts and nothing fundamental that drove the ZAR to those levels.
    • The change in ECB monetary policy coupled with a hawkish Fed ahead of today’s key US CPI report all causing a sell-off in global equity markets.
    • EMFX was not spared, the Mexican Peso, Russian Rouble as well Brazilian Real all lost ground against a charging US dollar.
  • The Greenback surging on the back of spike in US10YT yields, that reached 3.05% ahead of today’s US CPI print.
  • Not helping the ZAR were weaker than expected mining and manufacturing data ,even though the current account rebounded to post +R143bn for Q1 vs R132bn previous.
    • Gold production continued its decline as the sector posted a -27.8% decline vs -15% expected for April YoY.
    • General mining production also declined -14.9% in April vs -5% expected.
    • On the manufacturing side, production declined -7.8% vs -2.6% expected for April YOY.
    • Analysts blaming Eskom and the slow rebound from the KZN floods.

  • In addition more Liquidity drainage on the way as the ECB joins the rest of global central banks (ex-BOJ), who have switched from neutral to hawkish.
    • The ECB keeping rates unchanged but announcing a policy change.
  • Data :

    • 14h30 : US CPI 8.3% expected vs 8.3% previous
    • 14h30 : US CORE CPI 5.9% expected vs 6.1% previous .
  • Today :
    • After a decline of 2.35% the ZAR recovered to open at 15.4400 .
      • Expect some early session gains as exporters rush to take advantage of a weaker ZAR, with 15.3800-15.3500 a possibility.
      • The uncertainty around today’s CPI print, leads me to believe interbank traders are riding both sides of the range and triggering stop-losses,
      • SL’s Remains a good source of income, in a highly uncertain environment.
    • In summary :  THE ZAR WILL TRACK THE RISK TRADE : 
  • USDZAR :  Expect a range 15.3400-15.5800
    • Importers 15.2500-15.2000
    • Exporters 15.3500-15.4500
  • EURZAR :  Expect a range of 16.2700-16.5300
    • Importers 16.3400-16.2700
    • Exporters 16.4700-16.5300
  • GBPZAR :  Expect a range of 18.9900-19.5000
    • Importers 19.1800-18.9900
    • Exporters 19.3800-19.5000
  • USDZAR 15.4200
  • EURZAR 16.4000
  • GBPZAR 19.2800


  • Comair’s business rescue practitioners (BRP) have lodged a court application to liquidate the airline after they failed to raise the funding needed to save the airline and resume operations.
    • The BRP confirmed the action in a statement on Thursday.
    • The company, which owns and operates domestic carrier and has a franchise agreement to operate British Airways flight locally, has been around since 1946. Moneyweb
  • The NTA (National Taxi Alliance) has threatened if negotiations fail with the government, a national shutdown will be implemented.
    • There have been a number of reports that both Santaco and the National Taxi Alliance were believed to be organising a protest on Friday against the high fuel prices.
    • The alliance said that now they were in talks with the government to try and find a solution. EWN
  • President Cyril Ramaphosa on Thursday said that the Public Protector’s suspension was the best way to fulfil his obligations.
    • Ramaphosa announced his decision to suspend Busisiwe Mkhwebane on Thursday amid a parliamentary process to impeach her.
    • Earlier, The Public Protector had announced that she was investigating criminal allegations against Ramaphosa relating to the theft of cash at his Phala Phala Farm. NEWS24



  • Stocks declined sharply in NEW YORK, where in regular trading, the Dow fell 1.94%, while the S&P 500 and Nasdaq dropped 2.38% and 2.75% respectively.
  • US stock futures edged higher on Friday after a technology-led sell-off on Wall Street, with investors gearing up for a highly anticipated inflation report due out later today.
    • Big tech led the decline, with sharp losses from Meta Platforms (-6.4%), Alphabet (-2%), Apple (-3.6%), Microsoft (-2.1%) and Nvidia (-3.2%).
    • Those losses came as investors continue to assess the outlook for inflation and economic growth ahead of Friday’s May US CPI report.
    • A hot inflation reading could bolster expectations that the Federal Reserve will continue to aggressively hike rates in the second half of this year;
    • NB:  even with signs of economic slowdown and an extremely tight job market.
  • The 10-year US Treasury yield traded above 3%, moving closer to an over three-year peak of 3.2%, as investors assessed the outlook for inflation and monetary policy ahead.
    • The move came ahead of Friday’s highly anticipated May Inflation reading and is seen above 8%, increasing pressure on the Federal Reserve to stick to aggressive rate hikes.
    • The US Central Bank has raised its benchmark policy rate by half a percentage point for the first time since 2000 in early May while signalling it intended to increase it by the same amount in June. source: U.S. Department of the Treasury
  • Across the pond in Europe, the benchmark German 10YR reached 1.45%, it was an 8year high.
    • This was after the ECB said it will raise interest rates by 25bps in July, while leaving the door open for a more aggressive hike in September should the medium-term inflation outlook persist.
    • To add, the central bank confirmed expectations that it will end quantitative easing via the Asset Purchase Program in the end of June.
    • Meanwhile, policymakers upwardly revised year-end inflation forecasts to 6.8% and forecasted inflation to remain above the central bank’s target ceiling until the end of 2024.
    • Also, growth estimates for 2022 were revised lower to 2.8% in the bloc.
    • Annual inflation in the Eurozone rose to a record high of 8.1% in May, well above forecasts, mainly due to surging energy and food costs amid supply shocks from the war in Ukraine. Reuters
  • The Dow declined 638 to 32,272
  • The SP500 declined 97 points to 4,017
  • The NASDAQ fell 332 to 11,754
Futures Trading:
  • image : Trading economics
  • Asian Markets declined sharply on the back of a drop on Wall Street.

    • In Japan, the Nikkei 225 fell 1.49% to close at 27,824, retreating from two-month highs, as investors booked profits and took cues from a weak overnight session on Wall Street.
      • Investors also braced for crucial US inflation data that will guide the Federal Reserve’s policy tightening path.
        • Technology shares led the decline, with sharp losses from SoftBank Group (-2%) and resource-related stocks also took a hit from China’s Covid woes, sparking a retreat in commodity prices.
        • However, bucking the trend the and including Friday’s losses, the benchmark indexes closed higher for the fourth consecutive week.
      • In Australia, the  ASX 200 Index fell 1.25% to 6,932 on Friday, weighed down by losses in the technology and financial sectors. Australian tech firms followed Wall Street, with sharp losses.
        • Elsewhere, mining and energy stocks took a hit from China’s Covid woes, sparking a retreat in commodity prices.
        • Losses in the resources sector were led by Rio Tinto (-1.3%), And JSE Dual listed – South32 (-4.2%),
  • Crude oil Brent crude futures declined to trade near $122 /bl as investors weighed the demand outlook after China reimposed fresh lockdowns.
    • This countered signs of solid fuel demand in the US amid the peak summer driving season, with US gasoline stockpiles at the lowest seasonal level since 2014.
    • Supply remains a problem and last week, OPEC+ agreed to accelerate output increases over the next two months to tame runaway fuel prices and slow inflation.
    • However, OPEC warned that most of its members are “maxed out” on crude production and analysts considered the move hardly enough to compensate for lost Russian supply. Ene4rgy News
    • The EU continues to work towards a 100% ban on Russian crude imports.
  • Gold declined following a spike in US yields and the Dollar. The yellow metal traded below $1,850 /oz as a strong dollar and elevated Treasury yields and dimmed bullion’s appeal.
    • The US annual core inflation rate is expected to ease further in May, indicating that decades-high inflation had peaked in March.
    • The data will be crucial for the path of Fed policy and whether the central bank will raise rates less aggressively after July as it tries to rein in inflation without tipping the economy into recession.
      • The Fed is set to deliver two more 50 basis point rate hikes at its June and July meetings following a similar move in May, which has pressured gold in recent months.
    • The theme remains, risks to the global economic outlook arising from the war in Ukraine, rising borrowing costs, ongoing supply disruptions, and high commodity prices
      • It all continued to offer the bullion some support. Kitco metals
  • The US Dollar traded at 103.50 and held on to its overnight gains and hovering near its highest in three weeks, as investors gear up for a highly-anticipated inflation report that should guide the Federal Reserve’s policy tightening path.
    • US core consumer price growth is expected to ease further in May, indicating that decades-high inflation had peaked in March.
    • This could also give the Fed some wiggle room to raise rates less aggressively later in the year as it tries to rein in inflation without tipping the economy into recession.
    • Meanwhile, the Fed is set to deliver two more 50 basis point rate hikes at its June and July meetings following a similar move in May, which has boosted the dollar in recent months.
    • Investors also assessed the European Central Bank’s announcement that it would start raising interest rates next month, in a move that analysts considered no more hawkish than expected. FX news
COVID-19 SOURCE Cases / Deaths / Recoveries
  • WORLD 539,276,718 / 6,328,453 / 512,048,223
  • USA 87,114,740 / 1,035,320 / 82,935,242
  • SA 3,975,062 / 101,448 / 3,849,717
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