View this email in your browser


Morning NOTE


11 May 2022



The ZAR gained on some USD profit taking ahead of today’s key US inflation report.




  • The Rand strengthened to 16.0500 after trading at a weakest level at 16.2700.

    • Traders booking some profits ahead of today’s key US CPI inflation report.
    • A lower than expected number of 8.5% would be regarded as Risk asset friendly and would likely lead to a stronger Rand.
    • Conversely a higher than expected number would likely lead to a continued rise in Bond yields, a sell-off in risk assets and a weaker Rand.
    • The US 10YT recovering to trade below 3.00% to reach 2.95% , with traders keeping a keen eye on the yield. 
  • On the data front, we have ECB president Lagarde talking, and this is followed by

    • 14h30 US CPI 8.1% expected vs 8.5% previous
  • Recap : The annual inflation rate in the US accelerated to 8.5% in March of 2022.

    • It was the highest since December of 1981 from 7.9% in February and higher when compared with market forecasts of 8.4%.
    • Energy prices increased 32%, namely gasoline (48%) and fuel oil (70.1%) as Russia’s invasion of Ukraine pushed crude oil prices higher 
  • Today: Traders continue to watch the Risk trade.
    • However, with a decline in US yields, and a rebound in equities, the ZAR could benefit from some MORE USD  profit taking into the reading at 14h30.
    • Be aware that the USD remains in a bull-run and anything sub-16 could be used as hedging opportunities for short term importers. 
  • USDZAR :  Expect a range 15.9800-16.1800
    • Importers 16.0500-15.9800
    • Exporters 16.1300-16.1800
  • EURZAR :  Expect a range of 16.8200-17.1600

    • Importers 16.8900-16.8200
    • Exporters 17.0500-17.1600
  • GBPZAR :  Expect a range of 19.7100-19.9600

    • Importers 19.7800-19.7100
    • Exporters 19.8700-19.9600



  • USDZAR 16.0900
  • EURZAR 16.9500
  • GBPZAR 19.8200



  • Eskom reintroduced loadshedding as the grid remains under pressure, following multiple unit breakdowns.

    • The power utility warned of the possibility of higher stages should any further breakdowns occur during the day.
    • “The onset of winter has seen increased demand and this will lead to severe capacity constraints throughout this period, particularly during the evening and morning peaks.”
    • Unfortunately, this would generally require the implementation of load shedding during the evening peaks. News24
  • Covid; the health department reported 26 more deaths and an additional 7,523 new Covid cases.

    • South Africans bracing for another wave as the flu season also runs concurrent in the SA winter months.



  • In a highly volatile regular session on Tuesday, the Dow fell for a fourth straight day by 0.26%, while the S&P 500 and Nasdaq Composite gained 0.25% and 0.95%, respectively.
  • Investors will be watching for any upward surprises ahead of today’s US CPI report.

    • In its latest financial stability report;
    • The Fed said that “further adverse surprises in inflation and interest rates, particularly if accompanied by a decline in economic activity, could negatively affect the financial system. CNBC


  • The yield on the 10-year US Treasury note, fell to 2.95% as investors took a breather after a recent sell-off.

    • The yield hit 3.20% on Monday for the first time since November 2018, with the market pricing in the chances of an increasingly hawkish FOMC.
    • Now markets have grown concerned about the implications of such an aggressive tightening on the global economic growth.
    • Investors are now awaiting the US inflation report for May for further clues on the central bank’s rate-hike path. source: U.S. Department of the Treasury


  • The Dow fell 84 to 32,160
  • The SP500 rallied 9.8 to 4,001
  • The Nasdaq  gained 114 to 11,737
  • image : Trading economics


  • Asian markets mixed, after China Inflation Rate Hits 5-Month High.

    • China’s annual inflation rate accelerated to 2.1% in April from 1.5% in March, above forecasts of 1.8%.

      • It is the highest reading since November, amid logistic disruptions caused by strict COVID measures.
      • Meanwhile, producer prices increased 8% YoY, also higher than expectations of 7.7% but easing from 8.3% in March. TE
    • In Japan, the Nikkei 225 Index rose 0.32% to 26,250 as investors bought up companies with an upbeat outlook, while staying cautious of any upward surprise ahead of the release of US inflation data.

      • Analysts suggested that markets are waiting for confirmation that US consumer prices have peaked out before making big bets.
      • In Australia, the ASX 200 Index fell 0.6% to around 7,003, as investors remained cautious ahead of the US CPI report.
  • Crude, WTI jumped more than 1% to above $101 /bl, after losing 9% in the previous two sessions.

    • Prices spiking after supply side challenges returned after the EU said it was  gaining support to ban Russian oil.

      • However while major producers warned they may not be able to meet demand without further investment.
    • Analysts said that the impact of the embargo could be limited if the ban is watered down, but prices could still go higher.

      • Highlighting supply concerns further, the UAE warned that when fuel demand recovers from the pandemic, that OPEC+ may not be able to meet demand without further investment.
      • This followed the Saudi Arabian energy minister’s remarks that the world needs to pay attention not just to tight crude supply but energy capacity running short more broadly. Energy News
  • Gold fell below $1,840/oz as it remained under pressure from a strong dollar.

    • The dollar index remained near the 104 mark, the strongest in 22 years as traders switch into the Buck from bullion holdings.
    • Expectations of further Federal Reserve monetary tightening to combat inflation and fears of slowing global economic growth drove investors into the safety assets.

      • Investors are now awaiting the US inflation report for May for further clues on the central bank’s rate-hike path. Kitco metals
  • The Dollar index declined to 103.8 after 10YT yields fell below 3.00%. The Greenback however hovering near a 2-decade high, as investors looked ahead to key inflation data today.

    • The CPI print would provide clues on how aggressive the Federal Reserve will be in tightening monetary policy.
    • Investors have expectations calling for an 8.1% YOY  increase compared with an 8.5% rise recorded in March.
    • The Fed raised its benchmark interest rate by 50 basis points last week, the largest in 22 years.
    • Markets are priced for another hike of at least 50 basis points at the central bank’s June meeting, according to CME’s FedWatch Tool.


Cases / Deaths / Recoveries

  • WORLD 518,566,678 / 6,280,390 / 473,453,106
  • USA 83,778,760 / 1,025,104 / 81,059,093
  • SA 3,852,148 / 100,569 / 3,685,196



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.