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.
- 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.
- 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 :
- i.e LOWER CPI = ZAR STRONGER and HIGHER CPI = ZAR WEAKER
- 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 kulula.com 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
COVID-19 SOURCE https://www.worldometers.info/coronavirus/
Cases / Deaths / Recoveries
- image : Trading economics
- 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