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Morning NOTE

11 August 2022


The ZAR strengthened dramatically after US CPI data printed lower than expected, resulting in a global risk asset rally.


  • The Rand gained more than 3% to reach 16.1100 on Wednesday after latest US Inflation data pointed to a slowdown in rising consumer prices.
    • The US CPI printed at +8.5% which was lower than the expected 8.7% and the 9.1% previous.
    • The recent drop in energy prices on the back of demand worries the major contributor.
      • A slowdown in general economic activity and subdued commodity prices likely to indicate further slowdowns.
  • US yields dropped sharply with the 10YT trading as low as 2.68% (was at 2.80% before the data release).
    • The dollar suffering on the back of declining yields as both the G7 and EMFX complex benefitted from the Greenback’s slide.
      • EURUSD touched 1.0370
      • Cable ( GBPUSD) reached 1.2270
      • & USDZAR 16.1100
      • The USD index (DXY) trading at 105 after sliding 1% to 104.63
      • The rebound after Fed governor Daly warned it’s too early to claim victory over inflation.
      • Markets reducing their pricing probability for a 75 bps FED hike from 90% to 33% .

Significant data this week;

After yesterday’s excitement, we now await SA mining data.

 (NB: the sector continues to provide valuable Export dollars and any signs of recovery will be ZAR supportive).

  • Today

  • Friday


  • Expect a stronger ZAR as risk markets continue to rally following yesterday’s US CPI data.
  • Early on, we expect some profit taking in the ZAR, resulting early weakness,
    • …but the inflation data is hard to ignore and we expect Rand strength going forward.
  • In addition, traders will keep an eye on today’s SA mining and manufacturing data, but US rates remains the driver of market movements.
  • Late last Fed speakers tried to place a hawkish tone on the market, resulting in some Dollar buying, but this was reversed in early European trading.
    • Exporters are advised to cover on any ZAR weakness.
    • We expect the Risk rally to continue.

Expected Ranges

  • USDZAR :  Expect a range 16.0900-16.3800
    • Importers 16.1600-16.0900
    • Exporters 16.3000-16.3800
  • EURZAR :  Expect a range of 16.5300-16.8000
    • Importers 16.6500-16.5300
    • Exporters 16.7300-16.8000
  • GBPZAR :  Expect a range of 19.6400-16.9700
    • Importers 19.7300-19.6400
    • Exporters 19.8500-19.9700


  • USDZAR 16.2200
  • EURZAR 16.6900
  • GBPZAR 19.7900


  • The Constitutional Court dismissed Ace Magashule  last legal bid to get his suspension as the party’s secretary-general overturned.
    • The court explaining that there is no reasonable prospect for success.
    • Magashule wanted his suspension declared unlawful invalid and unconstitutional.
    • If successful like Mkhize they were seen as potential candidates to usurp Ramaphosa at the year end ANC congress. EWN
  • Sasol has announced a 96% increase in the price of piped gas, to R133,34 per gigajoule (GJ).
    • Industrial gas users say this poses a huge risk to the economy.
      • The price hike would cost South Africa R325 million per month as of 1 August 2022, warned industry body the Industrial Gas Users Association of Southern Africa (Igua-SA).
    • In conversation with Bruce Whitfield, Igua-SA CEO Jaco Human accuses Sasol of price gouging. Moneyweb
  • Johann Rupert, the chairman of Richemont won’t give in to activist shareholder Bluebell Capital Partners’ campaign to overhaul the boardroom structure at the world’s second biggest luxury group.
    • Rupert, who owns all the non-listed category B shares in the company, which represent 9.1% of the capital, but 50% of the voting rights,
    • ….said there was no reason to change the board “either legally or morally.”
  • Zimbabwe’s Minister of Foreign Affairs and International Trade, Frederick Shava, has called on Zimbabweans based in South Africa to respect the host nation’s laws and shun crime.
    • He added Zimbabwe remains ready to welcome back its citizens after the expiration of the Zimbabwe Exemption permit. IOL


  • In regular trading on Wednesday, the Dow gained 1.6%, the S&P 500 jumped 2.1% and the Nasdaq Composite surged 2.9%.
    • Leaving all three benchmarks closing at their highest in over three months.
    • The moves on the back of  the softer headline inflation number that came in at 8.5% in July.
    • CPI decelerating from an over 40-year high of 9.1% in June, prompting speculations for peak inflation and a less aggressive Fed.
  • US stock futures climbed higher on Thursday after the major averages rallied sharply in the last regular session.
    • Futures contracts tied to the three major indexes each rose about 0.2%.
    • In after-hours trading, Disney jumped nearly 7% on strong earnings and higher-than-expected Disney+ subscription numbers.


  • The yield on the US 10-year note declined sharply to the 2.7% level.
    • The yield approaching the four-month low of 2.5% hit earlier in the month on the back of  lower than expected inflation figures.
    • The data eased worries that the Fed will extend its aggressive tightening pace.
      • Consumer prices in the US rose 8.5% annually in July, lower than expectations of 8.7% and previous of 9.1%.
    • It was quite a snap back after backtracking hawkish bets after last week’s hot payroll data.
    • Hopes that the rise in consumer prices have peeked drove investors to reconsider the Fed’s dovish policy pivot.


  • The Dow added 476 to 33,309
  • The SP500 added 70 to 4,210
  • The Nasdaq  added 360 to 12,854

Futures Trading:

  • image : Trading economics


  • Asian markets broadly higher across the region on the back of lower US inflation data, markets however pairing gains after hawkish comments from FED governors.
    • In Australia, the S&P/ASX 200 Index jumped 0.8% to above 7,030, hitting its highest levels in over two months.
      • Nearly all sectors participating in the rally following overnight gains on Wall Street  on the back of softer-than-expected US inflation data.
      • The data raising hopes for a less aggressive Federal Reserve. High-growth technology and clean energy-related names led the advance.
      • Other index heavyweights also gained, including BHP Group (1.8%), Telstra (0.6%) and ANZ Bank (0.9%).
    • In  China, the Shanghai Composite rose 0.3% to around 3,240, recouping some losses from the previous session.
      • Traders also citing the better-than-expected US inflation report and speculations for a less aggressive Federal Reserve and spurred a broad rally in risk assets.
  • Crude oil WTI crude declined to $91/bl after official data showed that US crude inventories rose much more than expected.
    • Demand concerns continues to pressure prices.
    • EIA data showed that US crude stockpiles expanded by 5.5 million barrels last week, much higher than the 73,000-barrel increase expected by analysts.
    • Flows on the Russia-to-Europe Druzhba pipeline also resumed earlier this week as a payment dispute was resolved, easing supply concerns further.
    • Oil prices are still up about 3% so far this week, but remain near six-month lows after having erased all the gains seen since Russia invaded Ukraine.
  • Gold prices rallied above $1,790/oz after the softer US CPI data.
    • The yellow metal however retreating as traders booked profits following  hawkish remarks from Federal Reserve policymakers.
    • The metal jumped initially on before reversing towards the close after Fed officials signalled resolve in raising interest rates aggressively to convincingly tame inflation.
    • Although gold is widely considered as a hedge against inflation and economic uncertainty, higher interest rates raise the opportunity cost of holding non-yielding bullion.
  • The US Dollar recovered toward 105.5 on Thursday after sliding 1% in the previous session.
    • The slide on the back of weaker US CPI but traders assessed hawkish remarks from Federal Reserve policymakers, resulting in a dollar bounce.
    • In the latest developments, San Francisco Fed President Mary Daly warned in an FT interview that it is too early to “declare victory” in the fight against inflation.
    • She added that consumer prices remain “far too high and not near our price stability goal.”
    • Those remarks came as the headline inflation rate slowed to 8.5% in July 2022 from an over 40-year high of 9.1% in June amid a significant drop in gasoline prices.
  • The Euro jumped to $1.0370, a level not seen in a month.
    • The rally supported by a slightly weaker dollar after US inflation rate came below forecasts in July, easing expectations of an aggressive Fed rate hike next month.
    • Bets on rate hikes from the ECB for the end of the year were also lowered but the ECB is still seen raising borrowing costs by another 50bps in September.
    • Despite the gains, the common currency holds close to parity.
      • ~ concerns of a looming economic crisis in Europe persist as inflation shows no signs of peaking and the energy crisis is far from over.

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