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Morning NOTE

12 August 2022


The ZAR continued to register gains against the Dollar as more benign US PPI indicated that inflation might have peaked.


  • The Rand traded to a strongest level of 16.1000 before profit taking saw the unit lose ground towards 16.2800.

    • Earlier in the session the market ignored weak Mining and manufacturing data to focus squarely on the US PPI print.
    • Follow the previous day’s softer than expected CPI data, US PPI also declined at  the fastest pace in 2 years.
  • After initial drop in US yields and a decline in the Dollar, rates rebounded after Fed officials reiterated their determination to hike rate to combat inflation.
    • Officials, although welcoming the decline in CPI/PPI data, advising caution as they don’t believe inflation has yet peaked.
    • On the back of the hawkish rhetoric yields spiked with the US 10Yt hitting 2.90% from a low of 2.66% 2 session ago.
    • The Dollar recovering back above 105 and in turn sent Risk assets lower.
      • The SP500 declining from intra-session highs registers a negative close.
      • The move supporting Dollar buying resulting in a ZAR spike to 16.2800.
  • This morning the UK that GDP fell by -0.1%  QoQ, as analysts cited inflation and the country’s high cost of living.
    • On the back of a brutally hawkish BOE, expect more pain .

Significant data this week;

  • Friday
    • UK GDP GROWTH RATE : Came out lower than expected at -0.1% QoQ vs +2.8% expected
  • Next week
    • Tuesday
    • Wednesday

      • 13H00 SA  RETAIL SALES  FOR JUN + 0.1% EXPECTED VS 1% PREVIOUS ( ***key for the health of the US economy and Fed policy).


  • Expect some Dollar support and profit taking on long Rand positions. The jump in US yields like to support the Greenback.
    • Importers are encouraged to take advantage of current levels and cover commitments.
    • The likelihood of a break through 16.000 highly unlikely after the strong ZAR run.
    • The market will require new NEWS/ECO data to support such views.
    • Therefore expect consolidation and a move back towards 16.4000 not unlikely in the next 1 – 2 sessions.

Expected Ranges

  • USDZAR :  Expect a range 16.1300-16.3500
    • Importers 16.2000-16.1300
    • Exporters 16.2700-16.3500
  • EURZAR :  Expect a range of 16.6400-16.8500
    • Importers 16.7100-16.6400
    • Exporters 16.7900-16.8500
  • GBPZAR :  Expect a range of 19.6400-16.9100
    • Importers 19.7300-19.6400
    • Exporters 19.8300-19.9100


  • USDZAR 16.2200
  • EURZAR 16.7400
  • GBPZAR 19.7700


  • More Strikes? Unions are planning to challenge the government’s “unfair” wage increases.
    • This after Eskom employees secured a 7% pay increase but the rest of the state payroll only received a 3% boost.
    • The South African Parastatal and Tertiary Institutes Union (SAPTU), says it is prepared to challenge government over unfair salary increases for its members.
    • According to a statement released by the union on Friday, employees last received increases in 2019 and it was only an inflation adjustment. Moneyweb
  • Developers Fundamentum Property Group and JSE-listed Tongaat Hulett finally broke ground on Westown.
    • The development a new mixed-use mini city west of Durban in KwaZulu-Natal (KZN), almost four years after they announced plans for the initial development.
    • The multi-billion-rand development planned for land will be anchored by Westown Square – a “high street” shopping centre expected to have a R1.3 billion price tag. moneytweb
  • News reports indicated that Minister of Police Bheki Cele and his office spent more than R2.8 billion on hotel accommodation, entertainment and catering since he took office in May 2019 until June this year.
    • During the same period, Cele, his deputy Cassel Mathale, and officials in the ministry accounted for more than R800 million of the expenditure.
    • The other amount spent was police officials who reported directly to the National Commissioner of Police Sehlahle Fannie Masemola. IOL
  • The Western Cape is seeking to welcome cold weather with snow predicated.
    • The province remains worried about a low rainfall this winter as dams remain below “sustainable” water levels.
    • The South African Weather Service has issued a weather advisory.
    • “The public and small stock farmers should be advised that loss of vulnerable livestock and crops can be expected due to the combination of very cold, windy and wet conditions.
    • It further cautioned anyone intending on going out to sea to practise extreme caution. EWN


  • In regular trading in New York, the Dow inched up 0.08%, while the S&P 500 and Nasdaq Composite reversed early gains to close 0.07% and 0.58% lower, respectively.
    • Six of the 11 S&P sectors declined, with healthcare and consumer discretionary stocks leading the losses.
    • In addition, energy shares outperformed after higher oil and Natural gas prices.
    • Traders also booked profits and reassessed the outlook for US inflation and interest rates.
    • Futures contracts tied to the three major indexes were all near breakeven.


  • The 10-year US yield spiked to a 3-week high of 2.9% with focus instead on more rate hikes by the Federal Reserve.
  • Fed funds futures traders are now pricing in a 58% chance of a 50-basis-point hike in September and a 42% chance of a 75-basis-point increase.
  • Data showed US producer prices declined in July for the first time in over two years, while analysts expected them to increase, suggesting that producer inflation could be on a downward trend.
  • On top of that, consumer prices in the US rose 8.5% annually in July, lower than expectations of 8.7%, while the core inflation rate unexpectedly stagnated.


  • The Dow gained 27 points to 33,336
  • The SP500 declined 2.97 to 4,207
  • The Nasdaq  fell 74.89 to 12,779

Futures Trading:

  • image : Trading economics


  • Asian markets mixed after the  late drop on Wallstreet.  Stocks in NEW YORK giving back gains after yields spike on the back of more Hawkish Fed comments.

    • In Japan, the Nikkei 225 rallied 2.62% to close at 28,547. The benchmark setting multi-month highs, as risk-on sentiment dominated markets.
      • Traders citing the release of soft US inflation data, in addition the reshuffling of Japan’s cabinet eased concerns about political instability.
      • Prime Minister Fumio Kishida is now expected to search for the next Bank of Japan governor.
        • Kishida however signalled his intention to maintain an aggressive monetary easing stance characteristic of the “Abenomics” era.
        • All sectors finished higher
    • In Australia, the ASX 200 fell 0.54% to close at 7,033 on Friday.
      • The market retreating from two-month highs, with growth-oriented healthcare and technology stocks leading the decline.
      • Traders and investors continues to reassess the outlook for US inflation and interest rates.  Reuters
  • Crude oil WTI flatlined near $94/bl but were set to end the week higher more than 5%.
    • Traders citing amid various supply disruptions and expectations that fuel switching will boost demand.
      • Six oil and gas fields in the Gulf of Mexico have been shut after a leak at a Louisiana booster station halted two pipelines.
    • However the major player Shell Plc said that it expected pipeline service to resume on Friday.
      • Three of the six deepwater platforms owned by Shell produce a combined 410,000 bpd of oil.
    • This week’s gains follows a collapse in oil prices to six-month lows amid fears of a global economic slowdown. Energy news
  • Gold defied the late Dollar rally to hold onto its gains at $1793/oz. the yellow metal on track for a 4th straight week of gains.
    • Bullion supported by benign inflation data out of the US after yields dropped earlier in the week.
    • The spike in yields however ignored on the back of safe haven buying as geopolitical tension between Taiwan and China continues to rise.
    • Traders remained cautious as US policymakers indicated their commitment to keep raising interest rates until they see compelling evidence that inflation sustainably declines. Kitco metals
  • The US dollar held its recent decline toward the 105 mark on Friday and was on track to lose more than 1% this week.
    • Earlier this week as softer-than-expected US consumer and producer price growths in July prompted speculations for peak inflation and a less aggressive Federal Reserve tightening moving forward.
      • Markets are now priced for a higher chance of a 50-basis point rate hike in September versus earlier speculation of a bigger 75-basis point increase.
      • Earlier, San Francisco Fed Bank President Mary Daly said that while a 50 point rate hike in September “makes sense,” she is open to the possibility of a bigger hike to fight too-high inflation.
      • Minneapolis Fed President Neel Kashkari said that he expects the Fed to raise its policy rate to 3.9% by year-end and to 4.4% by end of 2023.
      • This after Chicago Fed President Charles Evans indicated that US rates will top out at 4% next year.

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