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Morning NOTE

2 August 2022


The ZAR consolidated around the R16.5000/$ level as traders wait for new information to drive direction, likely the  KEY NFP on Friday .


  • The Rand traded in a relatively narrow range of 16.4500 -16.6500 as traders look ahead to this week’s Jobs report.

    • Supporting the local unit remains a weaker US dollar with the DXY at 105.35
      • The Greenback lower across the board as US yields continue to drop on recessionary fears.
      • The USA now printing 2 consecutive quarters of negative growth. (economist’s definition of a recession).
        • The US 10YT printing 2.55% at the time of writing.
    • Central banks
      • Continuing the hawkish Central Bank theme and eroding the Dollar’s dominant position is the RBA (Reserve Bank of Australia).
      • The RBA once again hiking rates by 50bps (as expected), but governor Lowe issuing a “dovish” statement that future decisions would be data dependent.
      •  Up to now the FED has been the dominant policy hawk, resulting in the Dollar reaching 20 year high’s.
      •  Since then the ECB, RBA, BOC, BOE and the SARB have hiked interest rates slowing the dollar’s advance.
    • Yesterday SA manufacturing data disappointed to the low side with PMI’s at 47.6 vs 52.2 previous (below 50 is widely regarded as a contraction).
      • In addition US ISM manufacturing continued to expand at 52.8 vs 52 expected.
    • Risk assets also lower after the SP500 failed to hold onto early session gains in New York.
      • Seven out of the 11 S&P sectors declined, led by energy as oil prices dropped on a weakening demand outlook.
      • Investors remained cautious about the market due to a number of macro headwinds despite a strong rally in July and upbeat corporate earnings.
    • Chances remain for a Risk-off session.

Significant data this week.

  • Thursday :

    • 13h00 : Bank of England Rate decision + 25 bps expected.
  • Friday :

    • 14h30 : US NON-FARM PAYROLLS  +250K expected vs 372k previous
    • 14h30 : US UNEMPLOYMENT RATE 3.6% expected vs 3.6% previous


  • The local unit also continues to benefit from broad based Dollar weakness.
  • However this morning, we opening in a negative risk environment following a drop in stocks in New York and Asia.
    • Futures markets opening lower this morning, so expect a weaker ZAR for this session.
  • Importers advised to cover between 16.4400-16.3200, with a stop loss through 16.5000
  • As the week progresses Be aware of the NFP data risk on Friday.
    • The market currently expecting a weaker report.
    • This opens up a risk to the topside for Dollar-Rand as any positive news could see another Strong Dollar rally.
  • USDZAR :  Expect a range 16.3200-16.6900
    • Importers 16.4400-16.3200
    • Exporters 16.5900-16.6900
  • EURZAR :  Expect a range of 16.7900-17.1100
    • Importers 16.9200-16.7900
    • Exporters 17.0250-17.1100
  • GBPZAR :  Expect a range of 20.1100-20.3900
    • Importers 20.1800-20.1100
    • Exporters 20.2900-20.3900


  • USDZAR 16.5300
  • EURZAR 16.9700
  • GBPZAR 20.2400


  • In big thumbs up for renewable energy and Eskom’s continued failure to keep the lights on, the City of Cape announced a project to buy excess electricity from generating customers.
    • In the past, small-scale embedded generation (SSEG) customers were compensated through credits on their municipal bills – now they will be paid cash.
    • These customers will also be permitted to sell more electricity to the City.
    • The idea is to create an incentives programme to generate more electricity.  Moneyweb
  • Finance Minister Enoch Godongwana, said Eskom’s debt needs to be dealt with as it poses a risk to the state.
    • The minister said that Eskom had not asked for money yet but the utility’s debt was unsustainable
    • He added, “If the debt remains unsustainable, it poses a sovereign risk.  EWN
  • Eskom has awarded contracts for battery energy storage to two successful bidders.
    • It will help bridge the gap between supply and demand when the electricity grid is under pressure.
    • The power utility said the contract is for the design, supply and installation as well as operating and maintenance for a five-year period.
      • Battery storage capacity is required to supplement available energy, particularly for evening peak usage when electricity demand climbs.
  • British Airways has cancelled its franchise agreement with Comair.
    • The agreement had a cancellation trigger brought about by the provisional liquidation of Comair, provisional liquidator Cloete Murray confirmed on Monday.
    • Comair operated domestic and regional British Airways flights in southern Africa as part of the franchise agreement.
    • British Airways is now looking for a new partner in the SA market. News 24


  • US stock futures drifted lower on Tuesday after Wall Street kicked off the new month on a downbeat note.
    • Futures contracts tied to the three major indexes drifted flat to negative.
    • In regular trading on Monday, the Dow declined 0.14%, the S&P 500 lost 0.28% and the Nasdaq Composite fell 0.18%.
  • Markets now await the July nonfarm payrolls report on Friday and more earning reports on Tuesday from AMD, Caterpillar and Paypal, among others.
    • Inflation remains a concern especially against a back drop of negative economic growth.
  • In addition, geopolitical tensions between the US and China.
    • US House Speaker Nancy Pelosi will allegedly visit Taiwan today and China has warned of “serious consequences” if the trip goes ahead.
    • Meanwhile, concerns about the strength of the global economy linger and the earnings season continues.


  • The US 10YT declined to 2.55%.
    • It was a level not seen since April, as investors continued to pile into safe-haven assets.
    • Traders citing persistent fears that an aggressive tightening from major central banks will eventually tip leading economies into a recession.
    • The FED, the world’s most influential central bank, is expected to raise its key rate to a high of around 3.25% by year-end to tame runaway inflation.
  • However, recent signals of slowing economic activity, including disappointing GDP figures last week, supported a view that the Fed could moderate the pace of the rate increases.


  • The Dow declined 46 points to 32,798
  • The SP500 fell 11 points to 4,118
  • The Nasdaq  fell 21 points to 12,368

Futures Trading:

  • image : Trading economics


  • Asian markets lower across the region ahead of US house speaker Nancy Pelosi’s visit to Taiwan, despite China’s objections.
    • In Japan, the Nikkei 225 dropped 1.42% to 27,595 retreating from two-month closing highs.
      • The exchange reporting all sectors traded in negative territory as a stronger Yen, mixed corporate earnings and the risk of a global recession dented sentiment.
      • Investors were also kept on edge by fears of an escalation in Sino-US tensions as US House Speaker Nancy Pelosi is set to visit Taiwan despite objections from China.
    • In China, the Shanghai Composite fell 3% to 3,162, hitting its lowest levels in about two months.
      • High-growth technology and new energy stocks led the decline, with sharp losses from East. TE
      • Investor sentiment has also been dampened by the risk of a global recession as weak manufacturing data in major economies highlighted the darkening global economic outlook.
      • Traders citing as growing tensions between China and the US ahead of US House Speaker Nancy Pelosi’s expected visit to Taiwan sparked a broad sell-off in Asia.
  • Crude oil WTI prices slipped further toward $93 per barrel on Tuesday after tumbling almost 5% in the previous session.
    • Traders referring to weak manufacturing data in major economies highlighted the darkening global economic outlook.
      • JPM Global Manufacturing PMI softened in July, weighed down by declining output and new orders in developed markets such as the US, the Euro area, Japan and the UK.
        • In contrast emerging markets saw mixed results.
    • Fears that a global slowdown will hurt demand have gripped commodity markets in the past two months.
      • Currently, oil prices down more than 20% from the June high.
    • On the supply side, markets await the outcome of an OPEC+ meeting on Wednesday where it is likely to stick to its policy of modest supply increases, keeping the global supply tight.
      • For now Demand concerns outweighing tight supply. ENERGY NEWS
  • Gold prices continued its recent strong performance on the back of a falling US Dollar, under pressure from declining yields.
    • The yellow metal advancing to above $1770/oz.
      • Bullion hovering at its highest levels in four weeks, as a falling Dollar and Treasury yields supported bullion demand.
      • Recent weakness in US economic data gave rise to speculations that the Federal Reserve may raise interest rates less aggressively in the coming months,
      • The move pressuring the Dollar and US yields while driving gold prices higher.
        • This trend is expected to continue throughout August as more data out of the US continue to indicate an economic slowdown.
      • Geo-political tensions also on the rise, ahead of US House Speaker Nancy Pelosi’s visit to Taiwan also drove safe-haven demand for gold. KITCO METALS
  • The US dollar
    • The dollar traded near 105, hovering at its lowest levels in four weeks.
    • The increasing risk of US recession bolstered the case for a less aggressive monetary tightening from the Federal Reserve in the coming months.
    • The latest US GDP and manufacturing activity data signalled a weakening economy, while the monthly jobs report due on Friday is expected to show that the improvement in the jobs market is moderating.
      • Last week, the US central bank raised its policy rate by 75 basis points in a widely expected move.
      • Powell stating future policy decisions would be based on incoming data. Bloomberg
  • The YEN
    • The Japanese yen appreciated past 131 against the Dollar, hitting its highest levels in two months.
    • Yen traders citing soft US economic data and a weakening growth outlook, all but  supported expectations that the Federal Reserve will need to slow down the pace of future interest rate hikes.
    • Declining factory activity in other major economies and rising tensions between the US and China ahead of US House Speaker Nancy Pelosi’s visit to Taiwan also drove safe-haven demand for the yen.
    • Moreover, several Bank of Japan officials said recently that the central bank needed an exit strategy from its massive stimulus.
    • The move likely to support the currency from the land of the rising sun. Reuters

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