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Morning NOTE

17 May 2022


The ZAR recovered as risk appetite returned to markets across the world.


  • The Rand recovered from a low of 16.3200 to open at 16.1000, before reaching 16.0300 in opening trading.
    • Traders citing a liquidation of “stale” Dollar longs ahead of tomorrows Inflation data and Thursday’s SARB MPC.
  • The market widely expecting a 50 bps hike that will once again restore the ZAR’s carry attractiveness.
    • The market also awaiting Fed Chair Jerome Powell speaking at 20h00.
    • Attention will once again be paid to the language used and the possibility of a 75 bps hike.
    • In addition, USD Bulls have taken some money off the table ahead of Powell’s speech.
  • Today :  Expect a stronger Rand on the back of improved risk sentiment, but importers are encouraged to BUY USD below R16/$.
    • The longer term technical remain in favour of a Dollar Bull run as long as the FED hikes rates.
  • Major risk event this week:  
    • Thursday: The SARB MPC decides on rate policy with + 50 bps expected to the Repo and Prime Overdraft rate.
  • USDZAR :  Expect a range 15.9100-16.2800
    • Importers 15.9700-15.9100
    • Exporters 16.1600-16.2800
  • EURZAR :  Expect a range of 16.6600-16.9200
    • Importers 16.7000-16.6600
    • Exporters 16.8300-16.9200
  • GBPZAR :  Expect a range of 19.6500-20.0100
    • Importers 19.7200-19.6500
    • Exporters 19.9200-20.0100


  • USDZAR 16.0300
  • EURZAR 16.7500
  • GBPZAR 19.8000


  • Eskom says the exemption from load-shedding for the eThekwini municipality, which was hit by devastating floods in April, could soon change as this was under review.
    • “The eThekwini municipality has almost recovered its operations in terms of distribution in the regions affected by the floods.”
    • ‘It is not being loadshed but this will change soon and the teams, Eskom and eThekwini municipality are reviewing the situation,” said Eskom. source : Business day
    • Eskom is increasing power cuts to prevent a total collapse of the grid as issues grow from lack of imports to breakdowns at its coal-fired plants.
  • Public Enterprises Minister Pravin Gordhan has defended the decision to privatise the struggling national carrier.
    • Gordhan  previously described SAA as a fiscal drain costing government more than R49 billion in bailouts since 2006 and failing to make a profit since 2011.
    • The sale of a 51% stake in South African Airways (SAA) has raised many eyebrows and earned a threat of possible legal action from the Economic Freedom Fighters (EFF). EWN
  • More from Gordhan; Public Enterprises Minister Gordhan has called for the export of scrap metal to be banned.

    • He  said that this would ensure that there was no market for the copper, rail and other infrastructure that gets stolen and sold across the country.
    • “There is absolutely no doubt that copper theft and rail theft and other infrastructure theft and vandalism is having a major and disastrous effect on the efficiency of logistics in South Africa,” Minister Gordhan said.
    • Gordhan has called for strong action to curb the scourge. EWN


    • US stock futures edged higher on Tuesday following another volatile session on Wall Street.
    • Investors remain concerned about rising interest rates, high inflation and the prospect of a global economic slowdown continued to weigh on sentiment.
    • Futures contracts tied to the three major indexes were all trading in positive territory.
    • In regular trading on Monday, the Dow eked out a 0.08% gain ,while both the SP500 and Nasdaq declined.
    • US 10 Year Bond Yield was 2.92% traded higher.
    • Markets continue to price in aggressive near-term hikes meant to curb surging inflation and may tilt the economy towards a recession.
    • Latest data showed that the headline CPI in the US held close to a 40-year high at 8.3% in April, while the core CPI also came in above expectations at 6.2%.
    • The data stoking worries that elevated prices may persist and fuelling concerns about faster interest rate hikes. Source : US treasury
    • The Dow added 26 points to 32,223
    • The SP500 fell 15 points to 4,008
    • The Nasdaq  fell 142 to 11,662
    Futures Trading:
    • image : Trading economics
    • Asian markets higher on the back of a rally on Wallstreet.
      • Stocks rebounding after what has been a torrid time for markets as Risk assets declined sharply across the board.
      • In Japan, the Nikkei 225 recovered to trade at 26,643 in subdued trade on Tuesday, as investors navigated a challenging market environment.
        • Traders citing key risks to be rising interest rates, high inflation and the prospect of a global economic slowdown.
        • Investors welcomed news that Shanghai plans to gradually reopen after spending more than 6 weeks in lockdown.
      • In Australia the ASX200 recovered to trade at 7,128, and rallying for a 3rd straight session.
        • Aussie markets lifted by mining and energy stocks on higher commodity prices.
        • Local energy stocks tracked oil prices higher amid tight global supplies and a looming EU ban on Russian oil. TE
    • Crude oil rallied sharply to $114/bl after rising for four straight days to the highest close since March 23.
      • Supply (Russia) concerns seem to outweigh demand (China) concerns, resulting in upward pressure on prices.
      • On Monday, EU foreign ministers failed to pressure Hungary to lift its veto of a proposed oil embargo on Russia, with Lithuania saying the bloc was being “held hostage by one member state.”
      • The US oil benchmark has also been rising at a faster pace than Brent in recent sessions, as US gasoline prices surged to record highs on rising demand coupled with restrained refining capacity.
      • US producers are ramping up production in order to replenish inventories that have dwindled in the wake of Russia’s war in Ukraine. Energy News
    • Gold recovered to open at $1830/oz after the Dollar declined and traders booked profits ahead of Jay Powell’s speech tonight.
      • However, rising US yields slowing down the Yellow metals rise.
      • The benchmark US 10-year yield bounced back above 2.9% on Tuesday, limiting demand for the non-interest-bearing metal.
      • The WAR in Ukraine also sending more investors to the safe-haven metal, as what is being deemed “good buying levels” . Kitco metals
    • The US dollar declined to the 104 level on Tuesday, and in turn retreating from a 20-year high reached last week.
      • Traders took profits and scaled back bets on whether US interest rate hikes will drive further greenback gains.
      • The dollar also tracked a recent decline in US Treasury yields as investors sought the safety of bonds amid concerns that aggressive near-term hikes.
      • Markets are priced for at least a half percentage point rate increase at each of the next two Fed meetings in June and July.
      • Traders also keeping an eye on Powell’s speech tonight. FX news
    • Crypto
      • Bitcoin US Dollar traded at 30,300.5 this Tuesday May 17th, increasing 1.33% since the previous trading session.
      • The crypto currency stabilising after the recent loss in value following the FED’s announcement to drain liquidity from the market to fight inflation.
    Ukraine- Russia
    • Turkey opposed both Sweden and Finland’s application to join NATO.
      • The alliance needs a unanimous 30 member vote to obtain approval.
      • Both Nordic countries announced it would send envoys to Turkey to discuss.
      • Moscow has warned of “retaliatory steps” if the countries join the alliance, with Russian President Vladimir Putin describing the development as “a problem.” CNBC
    • Ukrainian forces have completed their “combat mission” in Mariupol, according to a statement by the country’s military.
      • It comes after hundreds of people were evacuated from a steel plant that was the last holdout in the city under relentless Russian bombardment.
      • Russian forces have claimed victory.
    COVID-19 SOURCE Cases / Deaths / Recoveries
    • WORLD 519,865,036 / 6,284,713 / 474,595,557
    • USA  84,066,379 / 1,026,109 / 81,163
    • SA 3,871,085 / 100,360 / 3,696,731
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