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Morning NOTE

15 June 2022


The ZAR retraced some of its losses to open below 16.0000 , ahead of tonight’s key FOMC meeting.


  • The Rand regained 1.44% on the back of “in-line” US PPI data. Equity markets also finding a BID, after the last 2-3 sessions of carnage.
  • The local unit however continues to remain vulnerable to US interest rate policy.
    • Before last week’s US CPI print, analysts were all calling for 50bps with the likelihood that inflation had peaked.
    • The data showed other wise as rising oil prices, supply bottlenecks and returning demand, accounted for 36% of the CPI Basket.
      • It implies that as long as Crude prices stay Bid, inflation will remain a problem.
  • Although not mainstream economists now predicting 75 to even 100 bps hikes.
    • This would likely put markets in a tailspin and expect more losses in risk assets across the board.
    • However – a 50 bps hike could be seen as positive and we might even get a rally.
  • US 10Y’s remain high with yields reaching 3.45% in expectation of a hawkish FED and this all supports the Dollar.

On the Data front

  • Today :
    • 13h00 SA retail sales  1.6% expected vs 1.3% previous
    • 14h30 US retail sales MAY 7.1% expected vs 8.2% previous
    • 20H30 : FED PRESS CONFERENCE : The language will be on critical importance.

  • The ZAR remains under pressure following Friday’s high US CPI .
    • However better than expected PPI and a rebound in Stock markets resulting in a better open for the local unit.
  • The potential for 15.8500-15.8000 on the cards in early JHB/LDN trading.
  • A break of 16.0600 and we might be heading to 16.2000.
  • NB: this FED meeting carries unusually HIGH RISK due to the UNCERTAINTY.
    • And the ZAR always on the back foot in a rising US rate environment
  • USDZAR :  Expect a range 15.8200-16.1700
    • Importers 15.9200-15.8200
    • Exporters 16.0300-16.1700 
  • EURZAR :  Expect a range of 16.5800-16.8500
    • Importers 16.6500-16.5800
    • Exporters 16.7500-16.8500 
  • GBPZAR :  Expect a range of 19.0000-19.3800
    • Importers 19.1400-19.0000
    • Exporters 19.2800-19.3800


  • USDZAR 15.9600
  • EURZAR 16.6800
  • GBPZAR 19.1800


  • President Cyril Ramaphosa announced he stands by the decision to suspend Public Protector Busisiwe Mkhwebane, pending an inquiry into her fitness to hold office.
    • The embattled Public Protector on Tuesday threatened CR with litigation if he failed to reinstate her by the close of business.
    • But the office of the Presidency confirmed on Tuesday night that CR would not give into Mkhwebane’s ultimatum. EWN
  • Traffic officials have closed a section of Spine Road between the N2 highway and Faure road after a large section of the roadway collapsed.
    • Heavy rain has led to flooding across the Cape since the start of the week.
    • Cape Town Traffic Service’s Kevin Jacobs: “The left lane on the N2 inbound at Spine Road is also flooded.
    • Traffic officers are diverting motorists around the scene. Motorists are advised to be patient while travelling in this vicinity. IOL



  • US stock futures rose slightly on Wednesday after a mixed session overnight.
    • Traders bracing for an aggressive move from the FED to tame surging inflation.
    • Dow futures rose 0.3%, S&P 500 futures edged up 0.4% and Nasdaq 100 futures gained 0.6%.
  • The Fed is set to announce its latest monetary policy decision on Wednesday, with markets betting on a 94% chance of a 75 basis point rate hike, the biggest since 1994.
    • The shift to price in a larger-than-usual rate hike came after a string of troubling inflation reports,
    • After the May CPI unexpectedly accelerating to a fresh 40-year high.


  • The 10-year US Treasury note yield skyrocketed to above 3.45% for the first time since April of 2011.
  • Following last week’s CPI reading, investors have dramatically increased their bets that the FED will raise interest rates by 75 basis points when it concludes its two-day meeting on Wednesday.
  • Prospects of an even more aggressive tightening to tame the highest inflation seen since late 1981 made the hope of a soft landing more elusive,
  • And investors growing concerned about the impact on the growth momentum.
  • Meanwhile, the policy-sensitive two-year US Treasury yield climbed to its highest level since 2007.


  • The Dow lost 151 to trade at 30,364
  • The SP500 lost 14 points to 10,828
  • The Nasdaq gained 19 gained 10,828

Futures Trading:

  • image : Trading economics


  • Breaking NEWS: EUROPE
    • European Central Bank announces emergency meeting to discuss market rout.
    • Borrowing costs for many governments have risen in recent days.
    • In fact, a measure known as Europe’s fear gauge has hit its highest level since early 2020.
    • The difference in Italian and German bond yields — widely watched among investors — widened the most since early 2020 earlier on Wednesday.
    • In Japan, the Nikkei 225 Index fell 1.14% to 26,326, closing at their lowest levels in nearly a month and tracking overnight losses on Wall Street.
      • The decline as  investors brace for an aggressive move from the Federal Reserve to combat inflation.
      • The Fed is set to announce its latest monetary policy decision on Wednesday and markets are betting on a bigger 75 basis point rate hike as the central bank tries to arrest rising prices.
    • In Australia stocks were lower as the ASX 200 Index fell 1.27% to 6,601 and in turn, closing at its lowest in about 18 months.
      • Investors digested data which showed consumer confidence in Australia dropped to recessionary levels in June amid surging inflation and an outsized rate hike by the Reserve Bank of Australia.
      • Investors are also bracing for an aggressive move from the Federal Reserve later on Wednesday amid speculations of a larger-than-expected 75 basis point rate increase. 
    • Traders worried about demand if the Fed pushes through with an aggressive hike policy to combat surging inflation.
    • Markets are betting on a bigger 75 basis point rate hike on Wednesday as the central bank tries to arrest rising prices, even at the risk of a recession.
    • China’s latest Covid outbreak also raised fears of fresh lockdowns that threaten to hit demand a new.
    • However, OPEC stuck to its forecast that world oil demand will exceed pre-pandemic levels in 2022.
    • US officials are also planning to apply a 21% surtax on oil company profits considered excessive. Energy News
  • Gold declined further as the flight to safety and the US Dollar continued.
    • Bullion suffering on the back of rising treasury yields that is supportive of the Dollar.
      • Recall : Gold pays no interest.
      • The Fed is set to announce its latest monetary policy decision on Wednesday and markets are betting on a bigger 75 basis point rate hike as the central bank tries to arrest rising prices.
      • A faster pace of monetary policy tightening also stoked fears of a possible recession in the world’s largest economy, driving further selling and forced liquidation across financial markets, including gold.
      • Looking ahead, analysts see further downside for bullion as investors continue to de-risk due to a highly uncertain inflation and growth outlook. Kitco metals
  • US Dollar above 105 and hovering around its highest levels in nearly 20 years, as investors gear up for an aggressive move from the Federal Reserve to tame surging inflation.
    • The Fed is set to announce its latest monetary policy decision on Wednesday, with markets betting on a 95% chance of a 75 basis point rate hike, the biggest since 1994.
      • The sharp pick up in expectations followed media reports, first by the Wall Street Journal, that a bigger rate increase was on the cards after data released last week,
      • The dollar also benefited recently from safe-haven inflows amid fears of an economic slowdown due to rapidly tightening financial conditions. FX news

COVID-19 SOURCE https://www.worldometers.info/coronavirus/

Cases / Deaths / Recoveries

  • WORLD 541,871,356 / 6,334,434 / 517,112,284
  • USA 87,549,563 / 1,036,483 / 83,339,680
  • SA 3,979,836 / 101,550 / 3,858,949

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