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Morning NOTE

19 July 2022


The ZAR consolidated close to the R17/$ handle ahead of this week’s SARB MPC rate decision.


  • The Rand consolidated around the 17 handle, even though Wall Street had a late session sell-off.
  • Locally, Eskom CEO once again announced load shedding will end this week.
    • And, the market squarely focussed on the SARB as it is expecting a 50 bps hike.
    • NB: This will be ZAR supportive as the MPC remains proactive in fighting rising inflation.
  • Internationally, Traders also closely watching the situation in Italy, after Prime Minister Mario Draghi attempted to resign from his post on Thursday.
    • This after a coalition partner, failed to back him in a confidence vote, but his  resignation was rejected by the Italian president.
    • Draghi is expected to address parliament on Wednesday but Italy’s 10-year bond yield rose 10 basis points (bps) on Monday to as high as 3.48%.
    • It was pushing the closely watched spread over German Bund yields to its widest level in over a month at around 235 bps.
  • NB: Any bad news could place the Euro under pressure and be a negative for Risk assets.
  • This week on the data front :

    • Tuesday :
      • 11h00  :  EU inflation expected +8.6% vs 8.1% previous YOY
    • Wednesday :
      • 10h00 SA CPI inflation Expected +7.2% Yoy vs previous 6.5%
    • Thursday :
      • 14H15 : ECB rates decision. Expected +0.25% vs 0 previous.
      • 15h00 : SA Reserve bank interest Rate decision. Expected + 50 bps (repo to 5.25%) and prime to 8.25%.
  • Today :
    • This morning we are opening range bound after the a weaker overnight session.
      • The ZAR recovering to the R17/$ handle.
      • We remain in quite large range (17.3000 – 16.8600) and we did open inside the range i.e. (17.1000)
        • The leads me to conclude that is it is highly unlikely we see large directional moves ahead of the SARB.
        • All of this pointing to a range session 16.9500 – 17.2600
    • Also, news of the FED’s 75 commitment, stalling the Dollar advance and proving to be ZAR supportive.
      • The local unit also supported as the SARB is expected to once again increase rates and thus supporting the ZAR’s carry advantage.
  • USDZAR :  Expect a range 16.9500-17.2600
    • Importers 17.0300-16.9500
    • Exporters 17.1500-17.2600
  • EURZAR :  Expect a range of 17.1700-17.4300
    • Importers 17.3000-17.1700
    • Exporters 17.3800-17.4300
  • GBPZAR :  Expect a range of 20.2100-20.5600
    • Importers 20.3800-20.2100
    • Exporters 20.5000-20.5600


  • USDZAR 17.0700
  • EURZAR 17.3300
  • GBPZAR 20.4500


  • Eskom announced that load shedding will cease by the end of the week.
    • This comes as more generation units are set to be back online.
    • Eskom CEO Andre de Ruyter, confirmed large units are coming online, and that the country could emerge from the crippling load shedding. IOL
  • In a shock to markets, Sasol, SA’s largest fuel producer, declared force majeure on the supply of petroleum products due to delays in deliveries of crude to the Natref refinery.
    • The refinery it owns with TotalEnergies SE, said it left just a fraction of the country’s fuel-production capacity still operational.
      • Natref, a 108 000 barrel-a-day plant, was forced to shut after the late oil shipments, the company said in a statement.
        • “Sasol Oil will not be in a position to fully meet its commitments on the supply of all petroleum products from July 2022”.
      • The shutdown means the whole of South Africa’s oil-refinery fleet is out of action after a string of other facilities suspended production over the past two years.
      • As a result, the country’s monthly petroleum product imports are set to as much as triple by next year from pre-pandemic levels, energy consultant Citac said in a May report. Moneyweb
    • Ace Magashule said Jessie Duarte died with some of the party’s top secrets.
    • He  made the comments at Duarte’s funeral on Sunday.
  • It has emerged, that Magashule  and former health minister, Mkhize as well as Mantashe all in the mix to contest the ANC presidential bid later in the year.  EWN


  • Equities declined in the final few hours of US trading following, news that Apple plans to slow spending on growth in 2023, as it anticipates an economic slowdown.
  • In regular trading on Monday, the major averages reversed a morning rally and sold off into the close.
    • The Dow fell 0.69%, while the S&P 500 and Nasdaq Composite declined 0.84% and 0.81%, respectively.
    • IBM also declined more than 4% in extended trading despite topping revenue and earnings estimates as the company lowered its forecast for cash flow.
  • US stock futures were steady in Asian trade on Tuesday as investors gear up for more earnings reports from major firms, remaining watchful of any potential downside risks.
    • Earnings watch includes heavyweights Tesla, Twitter, Snap, Verizon and many others will also report later this week.


  • The 10-year Treasury yield was little changed at 2.96% in the third week of July, below 3% hit early in the month.
  • Investors have scaled back expectations the Fed will deliver a big 100bps rate hike next week and only hike by 75 bps.
  • Last Friday, Fed Governor Waller and St Louis Fed Governor James Bullard said they favoured a 75 bps interest rate increase, rather than the 100 bps move.
    • At the same time, recent economic data showed the economy remains robust, despite strong inflation and rising interest rates.
    • Fed policymakers enter a “blackout” period this week before the FOMC meeting on July 26th and 27th.
    • Focus this week will be on corporate earnings and housing market indicators.


  • The Dow declined 215 31,072
  • The SP500 declined 32 points to 3,830
  • The Nasdaq  declined 92 points 11,360

Futures Trading:

  • image : Trading economics


  • Asian markets mixed in early trading.
    • US stock futures were steady in Asian trade on Tuesday as investors gear up for more earnings reports from major firms.
    • In Japan the Nikkei rallied 175 points to 26,964, with commodity-linked stocks leading the advance as the Federal Reserve nixed speculations for a bigger full percentage point rate hike.
      • Tuesday’s rally also came despite a weak overnight in New York after Apple said it would slow hiring and spending on growth next year to prepare for a possible economic slowdown.
    • In Australia, the ASX 200 declined 0.56% to close at 6,650, as losses in technology stocks countered gains in the resources sector.
      • Investors examined minutes of the RBA July meeting, where it signalled further hikes are needed.
      • The RBA said nterest rates were “still very low for an economy with a tight labour market and facing a period of higher inflation.”
  • Crude oil futures steadied above $102/bl after rallying more than 5% in the previous session as a still tight global market countered fears that a looming recession would hurt energy demand.

    • President Joe Biden’s visit to Saudi Arabia failed to yield any pledge from Arab leaders to ramp up production.
      • A Bloomberg report quoted Iraqi Oil Minister Ihsan Abdul Jabbar as saying that crude will remain above $100 a barrel for the rest of the year and stay high for the next few years.
      • An easing dollar and the Federal Reserve’s pushback against speculations for a bigger 100 basis point rate hike also lifted market sentiment and supported buying interest. Energy News
  • Gold steadied around $1,710/oz an ounce on Tuesday but remained close to its lowest levels in almost a year.

    • Headwinds from a strong Dollar and rising US interest rates continues to weigh on bullion’s appeal.
    • The metal also failed to sustain intraday gains made on Monday even as the dollar retreated. Analysts considered it a sign of technical weakness that increases the risk of further declines in gold prices.
    • The Federal Reserve is on track to raise interest rates by 75 basis points for the second month in a row at the July meeting, keeping the pressure on non-yielding bullion.
    • Signs of slowing economic momentum in China, Europe and even the US also failed to support gold prices as investors opted for the dollar as safe-haven asset.
  • US Dollar

    • The dollar stabilized  around 107.5 after sliding for two straight days, as traders reassessed the Federal Reserve’s policy tightening path.
    • However, the Dollar remains close to its highest levels in 20 years, underpinned by a relatively more aggressive US monetary tightening and safe-haven inflows spurred by global recession fears. FX news
      • However, some Fed officials quickly nixed such expectations and signalled that they are on track to raise rates by another 75 basis points this month.
      • Markets briefly speculated on a supersized 100 basis point rate increase last week after data showed US inflation accelerated further in June, marking a fresh four-decade high.
      • The news that Governors Bostic and Bullard dialed back expectations for a bigger full percentage point rate hike, slowed down the Buck’s advance.

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