The ZAR continued to trade towards the weaker side of the range after US NFP surprised to the upside.
- The Rand continued to trade weaker as risk assets took a back seat to a stronger than expected US jobs report on Friday.
- The payrolls surprising to the upside and lending support to the FED’s intention to hike 75 bps.
- With a labour market still expanding the FED using it as an opportunity to justify its aggressive rate policies.
- On Friday
- **The US economy added 372K payrolls in June of 2022, much better than market forecasts of 268K and only slightly below a downwardly revised 384K in May.
- Risk assets all declining as the SP500 traded below the key 3900 handle.
- Bond yields also spiking with the 10YT at 3.08% at the time of writing.
- This week we have key US inflation data with the market looking to see if price pressures have slowed.
- Locally, the key theme remains the ESKOM and the continuation of loadshedding even after the resolution of the strike.
- The ZAR under pressure on the back of ESKOM and US rate policies.
On the data front we have:
- Tuesday :
- 13h00 : SA manufacturing data with expected -1.6% vs -7.8 previous YOY ( **optimism on the back of the lifting of covid-19 restrictions)
- And +1% MOM vs -5.8% previous
- 13h00 : SA retail sales, with +1.3% expected vs +3.4% previous YOY (**here we see a slowdown in consumer spending to fuel prices).
- 14h30 : US INFLATION (CPI) expected 8.8% vs 8.6% YOY previous
- 14h30 : US CORE INFLATION (CPI) expected 5.8% vs 6% YOY previous
- 11h30 : SA mining (expected -18% YOY) and Gold production (expected -30% YOY)
- Movement Today :
- This morning we opening with a weaker Bias near the topside of the USDZAR range.
- Exporters are expected to exact some cover on the back of a ZAR that has lost nearly 12% in the last 5 weeks.
- In addition, focus remains on this week’s inflation data.
- This would provide more support for the carry trade with SA R186 bond at 8.99% offering attractive yields (2030 @ 10.62%)
- The SARB, remains firm in its hiking policies given large fuel hikes, and ESKOM’s “higher than inflation” WAGE hikes.
- However, with oil prices nearly $20 dollars as well as a decline in Copper and Wheat prices, it does appear that the global economy is already slowing down.
- This would be good news for the ZAR as a print lower or near the expected levels for CPI could imply inflation “have peaked”
Exporters are advised to cover at these levels especially those with longer term commitments, using FEC’s and Options.
Importers, can hold off as we do expect a retracement in ZAR weakness.
- USDZAR : Expect a range 16.7000-17.1000
- Importers 16.8600-16.7000
- Exporters 16.9700-17.1000
- EURZAR : Expect a range of 16.9400-17.3700
- Importers 17.0700-16.9400
- Exporters 17.2250-17.3700
- GBPZAR : Expect a range of 20.0500-20.4700
- Importers 20.1600-20.0500
- Exporters 20.4700-20.3300
- USDZAR 16.9400
- EURZAR 17.1800
- GBPZAR 20.2700
- Ratings agency, Fitch affirmed its stable outlook and rating assessment on Thursday.
- While, S&P Global unexpectedly revised its outlook on the country’s debt to positive, from stable, in May, but added South Africa’s position remains challenging.
- Phala-gate continues
- SA National Assembly speaker Mapisa-Nqakula has declined a request by the main opposition to form a committee to investigate allegations of theft at President Cyril Ramaphosa’s game farm.
- This comes weeks after reporting of the theft as well as allegations of large amounts of foreign currency stolen . EWN
- SA Flight prices, particularly on the busiest domestic route between Johannesburg and Cape Town, have spiked substantially following the collapse of Comair.
- Comair accounted for as much as 40% of supply in the market.
- Airlines have been accused of price gouging from all quarters but had fought back against the accusations.
- A return to CPT-JHB is now set at R6k if you lucky enough to find one. Moneyweb
- Ramaphosa in his weekly address said he understands why South Africans are angry about the Eskom crises.
- He said his administration remains intent on solving the crises.
- Eskom continues with its load shedding policies citing insufficient capacity to provide power to the grid. NEWS24
- US stock futures fell on Monday as investors looked ahead to a busy calendar week.
- inflation and consumer sentiment data, as well as Q2 earnings reports from big companies.
- Futures contracts tied to the three major indexes all traded in negative territory.
- The major averages ended mixed on Friday, with the Dow losing 0.15% and the S&P shedding 0.08%, while the Nasdaq Composite gained 0.12%.
- Those moves came as a stronger-than-expected jobs report allayed fears of an economic slowdown.
- The data confirming the FED’s case for continued aggressive tightening in the coming months to fight inflation.
- Bond yields remain supported after rising 18bps last week.
- The yield on the 10-year rose to 3.08% on Friday, as traders assessed the Federal Reserve’s tightening outlook amid stronger-than-expected payroll data.
- The jobs report cemented a 75bps raise in the fed funds at its July meeting.
- Also, minutes from the FOMC’s June meeting indicated that policymakers agreed that monetary policy needs to be more restrictive to tame inflation, even if it hampers growth.
- Still, the 2-year, 10-year part of the yield curve remained inverted, reflecting an increase in short-term risk perception and often seen as an indicator that a recession could follow in one-to-two years.
- The Dow declined46 to 31,338
- The SP500 declined 3.24 to 3.899
- The Nasdaq added 13.96 to 11,635
- image : Trading economics
Asia: Shares in Asia mostly fell on Monday, with the Hang Seng and the Shanghai Composite sinking near 3% and 1.5%.
- Traders citing news that China’s market regulator imposed fines on Alibaba and Tencent for not complying with anti-monopoly rules on disclosure of transactions.
- In Japan, however the Nikkei climbed about 1% to 26,812 trading at a near 2-week peak, on hopes for a political stability as the ruling party LDP boosted their majority in the upper house election.
- The election was held two days after the assassination of former Prime Minister Shinzo Abe who was widely considered an influential figure in the ruling party.
- Meanwhile, investors remained cautious ahead of corporate earnings reports and on concerns over rising new Covid cases.
Crude oil fell below $104/bl after posting a loss last week in volatile trading, as concerns about a global recession.
- News of potential new virus restrictions in China outweighed persistent supply-side issues.
- Prospects of a global recession that is expected to hurt energy demand continue to dominate market sentiment.
- Rising virus cases throughout China and the discovery of a new Omicron subvariant in Shanghai also raised fears about the potential for wider lockdowns in the country.
- In addition, the market remains nervous about plans by Western nations to cap Russian oil prices.
- President Joe Biden is also scheduled to visit Saudi Arabia this week amid efforts to tame elevated energy prices that are weighing on the economy. Energy News
- Earlier, President Vladimir Putin warning further sanctions could lead to “catastrophic” consequences in the global energy market.
Gold was hovered around $1,740 /oz, near its lowest levels in over 9 months, as a towering dollar continued to dampen demand for the greenback-priced bullion.
- Persistent concerns about global economic growth and an increasingly restrictive US monetary policy continued to lift the safe-haven dollar at the expense of other assets.
- Friday showed robust US hiring in June, bolstering the Federal Reserve’s aggressive stance against inflation.
- Atlanta Fed Bank President Raphael Bostic;
- Until recently among the central bank’s most dovish policymakers, said Friday he “fully” supports another 75 basis point rate hike this month. Kitco metals
The US dollar rose to around 107.4 on Monday, marching towards a fresh 20-year high.
- The Buck rallying on the back of persistent concerns about global economic growth and an increasingly restrictive US monetary policy.
- The Dollar benefitting from its role as a safe-haven currency and higher US rates.
- Analysts cited elevated global inflation, Europe’s energy crisis and Covid-related uncertainties in China as some of the factors that are driving dollar inflows.
- In addition, data released Friday showed strong jobs and hiring in June, confirming the Fed’s aggressive stance against inflation.
- Investors are also bracing for US inflation data on Wednesday, as another strong reading would likely cement expectations for prolonged aggressive Fed tightening. FX news