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Morning NOTE

20 June 2022


The ZAR consolidated at weaker levels following heavy selling last week.


  • The Rand opened at 15.9600 in early Monday trading, following an overnight weak level of 16.0200.
    • The local unit whipsawing on the back of Risk sentiment and markets looking less pessimistic in early trading.
  • Investors concerned about a future recession induced by aggressive Fed policy and high inflation.
    • The Fed’s insistence of bringing inflation back to 2% supporting that argument.
  • However, markets are slightly better Bid this morning, on the back of falling oil prices and declining US treasury yields.
    • Energy continues to be the driver in the inflation story as well as other commodity supply chain issues.
    • Lower oil prices, likely to lead to lower inflation especially if Demand drops off due to a recession.
  • Locally, the strikes and unrest in SOWETO keeping traders focussed especially after last years unrest in Gauteng and KZN.

On the Data front:

  • Wednesday:

    • 10h00:  SA INFLATION 6% expected vs 5.9% previous YOY
    • 10h00: SA Core INFLATION 4% vs 3.9% previous YOY
    • Wed/Thursday 14h30 : Fed CHAIR Jerome Powell starts his 2 day testimony to the US congress on the state of the US economy.
    • Once again likely to lead to increased volatility in financial markets.
  • Today:
    • Expect a wide range of 15.8000-16.1800
      • Low liquidity once again the back of a US holiday.
      • Once again result in poor liquidity conditions and a market vulnerable to moves either side of the open.
    • Later in the week, the market will keep an eye on Powell’s speech (Wednesday), and more hawkish comments likely to add to Risk asset sell-offs.
    • Likewise if he tones down the rhetoric, we could see some ZAR gains towards.
  • USDZAR :  Expect a range 15.8000-16.1800
    • Importers 15.9300-15.8000
    • Exporters 16.0800-16.1800
  • EURZAR :  Expect a range of 16.5600-16.9700
    • Importers 16.7100-16.5600
    • Exporters 16.9300-16.9700
  • GBPZAR :  Expect a range of 19.2800-19.7600
    • Importers 19.4500-19.2800
    • Exporters 19.6200-19.7600
  • USDZAR 15.9600
  • EURZAR 16.8100
  • GBPZAR 19.5300


  • Unrest and Strikes in Soweto continues to escalate after most of the main routes leading into Soweto remained cut-off on Monday morning.
    • News reports indicate residents barricading roads with burning tyres and debris.
    • Major routes have been blockaded since early on Monday morning, with traffic disrupted and Rea Vaya bus commuters left stranded.
    • Newly appointed national police commissioner Fannie Masemola and his predecessor, Khehla Sitole, have been drawn into the mix regarding theft at CR’s farm.
    • Details emerged of a secretive and off-the-books police investigation into the burglary at President Cyril Ramaphosa’s Phala Phala farm two years ago. NEWS24
  • The AA once again attacked the RAF (Road accident fund) as one of the primary reasons for sky rocketing fuel prices.
    • Calls are continuing for a review of the Road Accident Fund as prices continue to skyrocket.
    • Consumers are being battered as the increase in fuel prices adds further pressure on the cost of goods and services.
    • According to the Central Energy Fund’s mid-month estimates, South Africans could pay as much as R2 more per litre of petrol soon.
    • The AA’s Layton Beard believes the poorly managed Road Accident Fund is costing taxpayers more than is necessary. EWN
  • Finish prime minister, appealed to SA and African countries to take a stance on the Ukrainian WAR.
    • Most African countries, including South Africa, have chosen to take a non-aligned position on the matter.
    • South Africa chose to abstain in a vote against Russia by the United Nations General Assembly, which was aimed at suspending Russia from the UN Human Rights Council.
    • Haavisto also said Finland applied to join the North Atlantic Treaty Organisation (NATO) after Russia invaded Ukraine earlier this year.
    • Finland and Sweden have both applied for NATO membership in response to the invasion.
    • He added, Finland did not stay neutral during apartheid and urges SA and Africa to take a stand on Ukraine. News24



  • After a mixed session on Friday, US stock futures climbed in Asian trade on Monday as risk appetite returned to the markets.
  • But persistent concerns about inflation and a possible recession kept sentiment in check.
  • Dow futures rose 0.4%, S&P 500 futures added 0.5% and Nasdaq 100 futures gained 0.8%.
    • Those moves came after another week of heavy selling on Wall Street, with the S&P 500 losing 5.8% and sinking deeper into bear market territory.
    • Also, the Dow and Nasdaq Composite each fell 4.8% last week.
  • Volatility is expected to continue to whipsaw markets as aggressive monetary tightening in major economies aimed at bringing inflation down remains a threat to asset prices.
  • In the latest Fed commentary, Governor Christopher Waller said he would support another 75 basis point rate hike at the central bank’s July meeting
    • In addition, Cleveland Fed Bank President Loretta Mester said the risk of a US recession is increasing. US stock markets will be closed on Monday for the Juneteenth holiday.  TE
  • US10YT declined on the back of concerns that that US and Global economy is heading for a recession.
    • The US10 yield declining to 3.23% from 3.47%.
  • The decline in oil prices becoming a theme as investors weighed concerns about slowing global economic growth and fuel demand against expectations of higher near-term consumption and ongoing supply issues.
    • The US oil benchmark tumbled almost 7% on Friday as concerns about the economic fallout from higher interest rates rattled financial markets.
  • The Dow declined 368 points to 29,888
  • The SP500 gained 8 points to 3,674
  • The Nasdaq  gained 152 to 10,708
Futures Trading:
  • image : Trading economics
  • Asian markets mixed and still nervously lower after last week’s stock market sell-off.

    • In Japan, the Nikkei 225 fell 0.74% to close at 25,771, hitting the lowest levels in three months, as investors worry that aggressive monetary tightening could pull the global economy into recession.
    • Fed Governor Christopher Waller, became the latest US central banker to pledge an all-out approach to fighting inflation, supporting another 75 basis point rate hike in July.
    • Meanwhile, Cleveland Fed Bank President Loretta Mester said Sunday that the risk of a US recession is increasing, and that it will take years for inflation to fall to the central bank’s 2% target.
    • Commodity-related stocks led the decline in Japan, with sharp losses from Inpex Corp (-9.4%), Osaka Titanium (-4%) and Nippon Steel (-3.9%).
  • US Crude oil crude traded at $109.5 after a sharp drop in the previous session.

    • Traders citing volatility set to continue on the back of concerns about slowing global economic growth and fuel demand against expectations.
    • Demand concerns for once outweighing supply concerns.
    • The US oil benchmark tumbled almost 7% on Friday as concerns about the economic fallout from higher interest rates rattled financial markets.
    • Last week, the Federal Reserve led a global wave of monetary tightening by raising its benchmark rate by 75 basis points to combat surging inflation
    • Price support still provided by supply disruptions caused by the war in Ukraine and an unrest in Libya, as well as OPEC’s failure to pump more oil also continued to support crude prices. Energy News
  • Gold traded above $1,840/oz, recouping some losses from the previous session, after the dollar gave back some gain on the back of declining Treasury yields.

    • The metal declined nearly 2% last week amid a global wave of monetary tightening aimed at bringing inflation down, led by the Federal Reserve’s 75 basis point rate hike.
    • Concerns about the potential economic costs of an aggressive tightening kept markets on edge, providing some support to gold prices.
    • The yellow metal continues to trade in a wide range from 1820-1880/oz, as traders remain conflicted on the future direction of spot gold.
    • Inflation remains supportive of bullion but higher yields due to rate rises almost always eroding Gold’s appeal.
  • US Dollar traded lower in thin holiday trade to reach 104.50;  the Buck giving back some gains from the previous session, but remains close to a 20-year high reached last week.

    • The expectations that the Fed will continue to aggressively tighten monetary settings supported the currency.
    • The Fed raised its benchmark interest rate by 75 basis points last week, the largest increase since 1994.
    • In the latest commentary, Fed Governor Christopher Waller said Saturday he would support another hike of a similar scale, the next meeting in July.
    • he market now awaits Powell’s testimony on Wednesday and Thursday before the US congress.
  • Inflation

    • The US  inflation rate unexpectedly accelerated last month to 41-year highs.
      • The Federal Reserve increased the funds rate by 75bps to 1.5%-1.75% during its June 2022 meeting, instead of 50bps initially expected, after It is the biggest rate increase since 1994.
      • Fed Chair Powell signalled a similar move could come at the next meeting but he does not expect 75bps moves to be common.
    • Policymakers see interest rates increasing to 3.4% this year, well above 1.9% expected in March.
    • The jobless rate is seen higher for the 3-year period: 3.7% for 2022 (vs 3.5%), 3.9% in 2023 (3.5%) and 4.1% in 2024 (vs 3.6%). source: Federal Reserve
COVID-19 SOURCE Cases / Deaths / Recoveries
  • WORLD  544,354,209 / 6,340,915 / 519,727,058
  • USA   88,004,073 / 1,038,323 / 83,869,516
  • SA 3,986,601 / 101,604 / 3,870,895
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