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Morning NOTE

19 August 2022


The ZAR continued to lose ground against a rampant US dollar after more hawkish comments from Fed governors.



  • The Rand continued to slide, reaching a weakest level of 16.9500 in overnight trading on the back of more Hawkish rhetoric from regional Fed governors.

  • The latest move bringing the local units slide to -4.75% this week.
    • NB: It continues to be a DOLLAR STORY.
    • The Dollar rally intensified after St Louis Fed president, James Bullard (a noted hawk), said he is leaning towards a 75bps hike in September.
    • This was followed San Francisco Fed president, Mary Daly, highlighting the need to get inflation back to 2%.
    • All currencies sliding vs the Greenback as the Euro traded just shy of parity vs the Dollar.
    • The Euro losing ground as the ECB has a 50 bps priced in for September whereas a 75 Fed causing this latest Dollar rally.
    • The Dollar index reaching 107.66 at the time of writing.
  • US economic data however continues to disappoint, with Existing Home Sales declining more than expected due to the sharp rise in interest rates.
    • Existing home sales in the United States fell -5.9 % MoM (month-over-month) vs – 4% expected.
    • It was a 6th consecutive month of declines to the lowest level since May of 2020.
  • The Fed however ignoring all of these signs, as Bullard prefers front-loading the hiking cycle, before allowing for cuts in 2023 if inflation comes down.

Significant data this week;

  • Data wise there is nothing significant today, however next week paints a different picture.

    • Tuesday
      • SA unemployment
    • Wednesday
      • SA inflation data CPI
    • Thursday
      • SA inflation data PPI
      • US GDP consensus for another contraction of -0.9% vs -1.6% previous ( **This will be another market moving event).


  • We once again expect a weaker ZAR today on the back of weaker Risk asset markets across the globe.
    • Earlier this morning both German PPI (37%) and Japanese CPI (2.6%)  surprised the market to the upside.
    • Resulting in Stock futures opening lower as we head into the European session .
    • Inflation data once again supportive of the hiking narrative.
  • Against this back drop, it is unlikely that the ZAR will achieve large gains this session.
    • HOWEVER,
      • From a traders mindset, after a slide of nearly 5%it would not be an unreasonable assumption for traders to book some profits ahead of the weekend.
      • This could prove to be ZAR supportive as we approach the R17/$ handle.
  • With no significant data to move the needle, Fed comments and profit-taking likely to dominate today’s session.
  • For now USDZAR remains  in a “buy on the dip” phase.

Expected Ranges

  • USDZAR :  Expect a range 16.7400-17.0500
    • Importers 16.8400-16.7400
    • Exporters 16.9500-17.0500
  • EURZAR :  Expect a range of 16.9300-17.1400
    • Importers 17.0000-16.9300
    • Exporters 17.0700-17.1400
  • GBPZAR :  Expect a range of 20.0900-20.2700
    • Importers 20.1400-20.0900
    • Exporters 20.1800-20.2700


  • USDZAR 16.9200
  • EURZAR 17.0400
  • GBPZAR 20.1400



    • The future of Finance Minister Enoch Godongwana hangs in the balance amid charges of sexual assault against him.
      • Ahead of the SA MTBPS there remains a risk of him being replaced.
      • In addition, Detectives have asked Godongwana for a statement after a case of sexual assault was opened against him.
      • Godongwana said he spoke to detectives who asked him for his version of events.
      • He also confirmed he met with the ANC’s integrity committee on Wednesday. News24
  • Deputy President David Mabuza was back in Parliament on Thursday where he was again quizzed about the struggling power utility and the energy crisis.
    • Pushing back against the privatisation of Eskom, Mabuza, said the government has al the tools to get ESKOM functioning again.
    • Mabuza added that the country needed additional generation capacity and external energy could be brought in from outside of Eskom in the meantime. EWN
  • Standard Bank Group (SBG), Africa’s largest bank by assets, on Friday reported record headline earnings of R15.3 billion for the six months to 30 June 2022.
    • It was a surge of 33% on the comparative 2021 half-year.
    • Headline earnings per ordinary share was up 30%, to 936.2 cents, compared to 721.4c for the prior period.
    • The bank also rewarded shareholders, with an interim dividend of 515 cents per share, at a pay-out ratio of 55%. Moneyweb


  • Equity markets surprisingly resilient in the face of ultra-hawkish Fed rhetoric.
    • So far for the week, the major US indices i.e. the DOW and SP500, both trading in positive territory.
      • However, the Nasdaq is lower as investors continue worry about the expectation that the Federal Reserve will tighten further.
    • The fears of 75 bps making the rounds after Bullard’s comments.
  • This morning stock futures all lower as we approach the start of the week’s final session.


  • The US 10YT trading at 2.92% yield on the back of hawkish Fed statements as markets look to price in 75bps.
    • This is a different picture at the start of the month of August where the yields of the benchmark bond was set at 2.55%.
    • Global inflation also remaining sticky, and this risk likely to add fuel to the fire.
      • German, UK and even Japan (for years a deflationary basket case), has also printed higher than expected CPI.
  • In addition to the Fed meeting at the end of September, the ECB is also expected to hike 50bps.


  • The Dow added 18 points to 33,999
  • The SP500 added 9.7 points to 4,283
  • The Nasdaq gained 27 points to 12,965

Futures Trading:

  • image : Trading economics


  • Asian markets lower this morning following rate hike fears in the USA.
    • In Japan, the Nikkei 225 shed 0.04% to close at 28,930. Japanese traders on edge after a hot domestic inflation reading.
      • The data challenging the BOJ’s firm commitment in keeping interest rates ultra-low.
      • Japan’s headline inflation rose 2.6% YoY in July from 2.4% in June, accelerating at the fastest pace since April 2014.
    • In China, the Shanghai index fell 0.2% to around 3,270, extending losses from the previous session.
      • Traders citing China’s shaky economy reflected by weaker-than-expected domestic data and slow appetite for credit.
      • Mega banks, Nomura and Goldman Sachs downgraded their forecasts for Chinese GDP on Thursday.
      • This poses a challenge to the PBoC which is pressured to take more easing steps.
      • The PBOC is now expected to cut rates on Monday after unexpectedly slashing two key rates earlier this week. Bloomberg
  • Crude oil continues to be gripped by demand fears with both the US WTI contract and North Sea Brent crude price below $100/bl.
    • Recessionary worries and the impact on demand causing a slide in prices.
    • The US Fed remains steadfast on raising interest rates further to bring inflation substantially lower.
    • On the supply side, Russia sees revenue from energy exports jumping 38% this year due in part to higher oil export volumes.
    • In addition, talks of a revival of the Iranian nuclear deal, also allowing for more supply and likely to pressure prices further. Reuters.
  • Gold just can’t catch a break and prices continues to slide to $1750/oz.
    • Prices under pressure due to the US Fed’s commitment to keep raising interest rates to bring down inflation.
    • The US central bank’s hawkish stance has pushed up the dollar to a one-month high against major rivals.
    • The greenback rallying on the back of rising rates making gold more expensive for buyers than holding other currencies. Kitco metals
  • The US dollar index broke above the 107 mark, a level not seen in a month, as investors reassessed the outlook for monetary policy.
    • This following fresh hawkish remarks from several Fed policymakers.
    • St Louis Fed President James Bullard echoed the Fed’s intention to tighter monetary policy, leaning towards favouring another 75 bps hike in September.
    • San Francisco Federal Reserve President Mary Daly highlighted the need to push interest rates to the restrictive territory to bring inflation down to its 2% target.
    • Market moves came after minutes from the last Federal Reserve meeting signalled that a dovish pivot is unlikely until such an aggressive tightening would drag on growth. Fx news
  • The Euro traded below $1.0100, and just  above the key $1 dollar parity level as investors balance the ECB policy tightening path against the region’s economic outlook.
    • The ECB is seen raising rates by 50 bps in September, following a similar move in July to tame soaring inflation.
    • However, the region’s outlook is of concern due to the energy crisis triggered by reduced supplies from Russia.  Fx news

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