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Morning NOTE

22 August 2022


The ZAR declined 5.20% last week on the back of a rampant Dollar, after yields spiked due to the FED’s commitment to bring down inflation.


  • The Rand encountered a perfect storm losing close to 85 cents against the Dollar.

    • The move post the FOMC minutes, showed a strong commitment to bringing down inflation.
      • The US dollar fast approaching 20 year high’s reached in July.
      • Hawkish statements from Bullard, calling for a 75 bps hike sent the Greenback on a tear against all currencies.
      • In addition, other governors all in favour of front-loading the hiking cycle as inflation remains near 40 year high’s.
      • The US10YT AT 2.98%
    • Locally, the market also paying close attention to the legal battles of Finance Minister Enoch Godongwana.
      • Earlier, President Cyril Ramaphosa said he is aware of the sexual assault allegations levelled against Finance Minister Enoch Godongwana.
      • Ramaphosa says legal processes emanating from the sexual assault allegations levelled against Finance Minister Enoch Godongwana should be allowed to run its course. EWN
    • Focus also turning to Jerome Powell at the Jackson hole central bankers symposium this week.

Significant data this week;

  • Tuesday
    • 11H30 : SA unemployment Q2 : 35% EXPECTED
  • Wednesday
    • 10H00 : SA CORE Inflation data CPI JULY 4.5% EXPECTED
  • Thursday
    • 14H30 : US GDP consensus for another contraction of -0.8% 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 sentiment.
    • Investors exiting risk assets as major stock markets remain under pressure following Ultra hawkish US rate statements.
    • Rising yields also not supporting markets.
  • However, on  Wednesday and Thursday’s data (SA inflation) will move the focus back to the SARB’s and the MPC’s rate hikes.
    • With CPI expected to be well above the 6% upper band, expect another strong reaction from the SARB.
    • This will once again be ZAR supportive as the carry advantage likely to be maintained.
  • As noted before : the ZAR’s directional trend (like for all currencies), determined by the US FED’s monetary policy.
  • For this session, Dollar Rand remains in a “buy on dips” on the back of strong dollar across the board.

Expected Ranges

  • USDZAR :  Expect a range 16.8700-17.1200
    • Importers 16.9500-16.8700
    • Exporters 17.0500-17.1200
  • EURZAR :  Expect a range of 16.9300-17.1400
    • Importers 17.0100-16.9300
    • Exporters 17.1100-17.1400
  • GBPZAR :  Expect a range of 20.0000-20.2700
    • Importers 20.0700-20.0000
    • Exporters 20.1600-20.2700


  • USDZAR 17.0200
  • EURZAR 17.0600
  • GBPZAR 20.1100


  • Wednesday’s nationwide, planned strike by COSATU likely to cause more damage to the economy, according to leading economists.
    • The unions said the nationwide strike planned for Wednesday will include stay-aways and rallies, which are expected to take place across the country.
    • The unions are looking to voice their anger and frustration over the rising cost of living, relentless power cuts, high fuel prices and unemployment. EWN
  •  The ANC in Limpopo has once again contradicted chairperson Stan Mathabatha’s assertion that the party supports President Cyril Ramaphosa’s second term ambitions.
    • For the 2nd time since January, the provincial ANC has distanced itself from Mathabatha’s endorsement of Ramaphosa ahead of the conference scheduled for Nasrec in Gauteng. IOL
    • Members saying the province has not yet decided on who to support in the upcoming national elective conference set for December.
  • Ramaphosa has hit back at critics who have asked him to fire, the current finance minister Godongwana.
    • He said that it is important to  ‘Allow legal due process to run its course’.  News24


  • Markets opening the week lower ahead of the much awaited Jackson Hole symposium.  All eyes likely to be on comments from Jerome Powell and guidance to rate policies.
    • Monday futures market for the major averages opened lower, after central bank commentary reignited fears of aggressive interest rate hikes.
    • Last week, the Dow fell 0.16%, the S&P 500 fell 1.21% and the tech-heavy Nasdaq declined 2.62%.
    • Federal Reserve officials indicated their commitment to keep raising interest rates to combat inflation.
    • The standout was St. Louis Fed President James Bullard saying, he is considering a third straight 75 basis point rate hike at the September meeting. CNBC


  • The yield on the 10-year US topped 2.9%, a level not seen in a month, as investors reassessed the outlook for monetary policy following hawkish remarks from several Fed policymakers.
    • Fed governors highlighting, the Fed’s intention for tighter monetary policy and  leaning towards another 75 bps hike in September.
    • 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.
  • In the UK,
    • Britain’s 10-year moved past 2.4%, on expectations the Bank of England will continue its aggressive tightening. The BOE widely expected to deliver a back-to-back 50 bps increase in rates.
    • This as inflation topped analyst estimates and hit a double-digit for the first time in 40 years in July.
    • The BOE raised borrowing costs by 50 bps earlier this month, the most since 1995 and financial markets price in a 96% chance of another half-point rate hike at the September meeting.
    • Such a move would bring borrowing costs to 2.25%, the highest since 2008. Reuters


  • The Dow declined 292 to 33,706
  • The SP500 fell 55 to 4,228
  • The Nasdaq declined 260 to 12,705

Futures Trading:

  • image : Trading economics


  • Asian markets all lower following last week’s decline across the world.
    • In Japan, the Nikkei 225 declined 0.47% to close at 28,794, retreating further from 7-month highs.
      • Traders citing hawkish remarks from Federal Reserve policymakers reignited fears over aggressive US interest rate hikes.
      • Investors are also bracing ahead of Fed Chair Jerome Powell’s speech at the annual Jackson Hole symposium this week which could guide the outlook for US monetary policy.
  • In Australia, the ASX 200 fell 0.95% to close at 7,047. The Aussie benchmark retreating from 10-week highs as investors worried about aggressive interest rate hikes from the FED.
    • Technology stocks led the decline and energy and mining stocks also tumbled on weaker commodity prices.
  • Crude oil, declined below $90/bl, extending losses from last week.
    • Traders considered the prospect for more Iranian supply following US President Joe Biden’s discussions with European allies about reviving the 2015 nuclear deal.
    • Biden spoke with leaders from France, Germany and the UK on Sunday and discussed “ongoing negotiations” toward a nuclear agreement.
    • Oil and other commodities have also been declining since June over escalating fears of a global economic slowdown.
    • Traders blaming ultra, aggressive rate hikes to tame surging inflation as the main reason for a potential slowdown and a drop in demand. Energy News
  • Gold declined  below $1,750/oz. The move a continuation after the Yellow metal was seen tumbling 3% last week.
    • The rise in US yields after hawkish remarks from US policymakers lifted the dollar in favour of Gold.
    •  Last week, a number of Federal Reserve officials stressed the need to keep raising borrowing costs to get ahead of inflation.
    • Bullard said he is considering support for a third straight 75-basis point rate hike in September.
    • However, markets are currently priced for a slightly higher chance of a 50 basis point rate increase in September.
    • Investors now look ahead to Fed Chair Jerome Powell’s speech at the annual symposium in Jackson Hole, Wyoming this week to guide the outlook for US monetary policy. Kitco metals.
  • The US  dollar rallied above 108 on Monday. The Buck approaching a 20-year high of 109.3 reached in July.
    • The moves supported by views/bets on expectations that the Fed will continue to aggressively raise interest rates to bring down inflation.
    • Bullard the main culprit as he continues to call for 75. Markets however still looking at 50 as the most likely outcome.
  • In Europe , the single currency  depreciated below $1.0100. the Euro continues to flirt with 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 but the region’s outlook is of concern due to the energy crisis triggered by reduced supplies from Russia.
    • However, continuing to pressure the Euro is a Dollar is moving again toward 20-year highs lifted by hawkish remarks from Federal Reserve officials.

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