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Morning NOTE

15 August 2022


The ZAR drifted weaker on the back of a recovering Dollar and rising US yields.


  • The Rand weakened in early Monday trading following a jump in US yields. The US 10Yt once again 2.9%.

    • Various Fed governors reiterating the FED’s restrictive monetary policy stance, with the ultimate objective being 2% inflation.
    • The governors all welcomed the slowdown in CPI and PPI last week, but they were clear in their assessment that its too soon to celebrate.
      • The Dollar advancing on the back of those comments.
      • EMFX as well as G7 under pressure vs the Greenback  ahead of Wednesday’s FOMC MINUTES.

Significant data this 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).
  • The language in the minutes likely to give an idea of the discussion towards future monetary policy and how far the Fed is likely to go. It explains the profit taking on Dollar shorts.


  • Expect a weaker ZAR ahead of Wednesday’s Fed minutes.
  • The Dollar finding support on the back of the jump in US yields, following comments by a host of Fed governors.
    • Importers are encouraged to take advantage of current levels and cover commitments.
    • As we expect a weaker ZAR heading into Wednesday.
  • NB: The likelihood of a break through 16.000 highly unlikely after the strong ZAR run.
  • A move towards 16.4000 remains on the cards.

Expected Ranges

  • USDZAR :  Expect a range 16.0900 – 16.3500
    • Importers 16.1700-16.0900
    • Exporters 16.3000-16.3500
  • EURZAR :  Expect a range of 16.4600 – 16.7500
    • Importers 16.5700-16.4600
    • Exporters 16.6800-16.7500
  • GBPZAR :  Expect a range of 19.5800 – 19.8500
    • Importers 19.6300-19.5800
    • Exporters 19.7300-19.8500


  • USDZAR 16.2600
  • EURZAR 16.6500
  • GBPZAR 19.7000


  • In a Risk to SA financial markets, SA Finance Minister Enoch Godongwana is yet to be charged after a case of sexual assault was opened.
    • At the weekend, Mpumalanga police confirmed that a case had been opened against a prominent person.
      • Skukuza Police Station confirmed a criminal complaint was laid by a hotel employee.
    • The woman, who works at the Kruger National Park, has accused Godongwana of violating her while on holiday with his wife. EWN
  • South Africa will have an infrastructure investment gap of R4.8 trillion by 2030.
    • The numbers are based on the aspirational target in the National Development Plan (NDP), and will likely happen unless the country increases its investment in infrastructure.
    • This is according to Dr Hurbert Joynt, programme manager for Infrastructure South Africa’s Centre for Excellence.
    • He reiterated that the aspirational target in the NDP is for gross fixed capital formation to comprise 30% of GDP by 2030. Moneyweb
  • Striking employees of the South African Revenue Service (SARS) have returned to work.
    • The announcement came after unions suspended their industrial action, against the revenue collector .
    • Although employees have returned to work, the parties have not yet reached an agreement meaning that unions and SARS will have to return tp the negotiating table.
      • “The suspension of the industrial action affords all parties the opportunity to work towards progressing the negotiations and related discussions towards settling the dispute,” said SARS in its statement. Moneyweb .


  • After a strong end to last week, with stocks rallying strongly after the softer than expected inflation data.
    • The SP500 reaching 4186. The broader market index up 17% off the lows reached in June (3635).
    • The market of the opinion the FED will have to slow down as the economy contracts.
    • In addition, there are no signs of a shrinkage of the FED’s balance sheet , if any it continues to grow, resulting in QE conditions that will continue to support risk assets.
  • This morning stocks futures mixed in Asia, US futures (lower) on the back of profit taking, but Asian equities ( lagging ) remain well bid on the back of easing inflationary conditions in the USA.


  • The US 10-year note consolidated around the 2.90% level, a level not seen in three weeks.
    • Traders continue to bet that the Federal Reserve will go ahead with its aggressive tightening plan despite signs of cooling inflation.
      • SF Fed President Mary Daly, said that while she sees a 50 bps rate hike in September as appropriate, she left the door open for a sharpest move to tame sky-high inflation.
    • Market moves came despite softer-than-expected US headline inflation and the first decline in producer prices in more than two years.
    • The Fed continues to want to front load the hiking cycle to combat inflation resulting in a severe inversion of the 2 v 10’s, that is traditionally a good indicator of a recession.


  • The Dow added 424 to 33,761
  • The SP500 gained 72 to 4,280
  • The Nasdaq  added 267 to 13,047

Futures Trading:

  • image : Trading economics


  • Asian markets  all higher following last week’s strong performance on Wall Street.

    • In Japan, the Nikkei 225 jumped 1.14% to close at 28,872, with the benchmark hitting multi-month highs.
      • Growth-oriented technology and consumer stocks led the advance, with strong gains from SoftBank Group (5.2%).
      • Investors also assessed data showing Japan’s economy grew 2.2% on an annualized basis in the second quarter of 2022, lower than the 2.5% increase expected by analysts.
      • Traders citing easing inflationary pressures in the US as the major factor for a change in market sentiment that inspired a fresh rally in global stocks.
      • In Australia the ASX 200 rose 0.45% to close at 7,064. The index higher as it moves towards its highest level in over two months.
        • Australian shares also tracked a Friday rally on Wall Street as signs of easing inflationary pressures in the US lifted investor sentiment.
        • In addition, Nearmap Ltd led technology sent stocks higher, after it jumped 25.8% after getting a A$1.06 billion takeover bid from a US private equity firm.
  • Crude oil flatlining with WTI trading around the $91.20/bl level for the last few session. Last week’s prices were higher on supply concerns.
    • This morning WTI futures fell toward $91/bl, extending losses in the previous session.
    • Traders citing demand concerns as global economies continue to slowdown. In addition, prices facing pressure from the prospect for increased supply from Iran and Saudi Arabia .
      • Iran’s state-run IRNA reported Friday that an EU proposal to revive the 2015 Iran nuclear deal “can be acceptable if it provides assurances” on Tehran’s key demands.
      • Saudi Aramco also said that the state-owned firm stands ready to raise crude output to its maximum capacity of 12 million barrels a day if the Saudi Arabian government orders it to do so.
      • On the demand side, weak economic data raised fresh demand concerns in top importer China.
  • Gold continues to hold its gains. The Yellow metal advancing even though US yields have once again begun to rise.
    • Prices consolidated near the key psychological level of $1,800/oz.
    • Traders citing a falling dollar amid expectations that the Federal Reserve may slow the pace of interest rate hikes due to signs that price pressure may have peaked.
      • US import prices fell for the first time in seven months in July, due in large part to lower fuel and nonfuel costs.
    • The data came after US consumer and producer price growths posted lower-than-expected in July, prompting speculations of peak inflation.
  • The US dollar recovered to trade at 105.87, after rising half a percent in the previous session.
    • Traders reassessed the outlook of US monetary policy following a raft of hawkish remarks from Federal Reserve officials.
    • Following comments from Fed president Mary Daly, the Richmond Fed Bank President Thomas Barkin followed suit.
    • He said the Fed will have to continue to move rates into “restrictive territory” until he sees a period of sustained inflation under control.
    • He also acknowledged easing consumer and producer prices in July as a welcome sign, but wants to see inflation running sustainably within the 2% target.

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