View this email in your browser

Morning NOTE

11 July 2022


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
  • Wednesday :

    • 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
  • Thursday :

    • 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”
  • NB:
    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

Futures Trading:

  • 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

Copyright ©
2022 RussellStone Treasury
All rights reserved.

Our mailing address is:

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.