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Morning NOTE

22 July 2022


The ZAR strengthened sharply after the SARB surprised the market with a 75 bps rate hike.


  • The Rand gained 1.50% after Reserve Bank governor Lesetja Kganyago stated that the SARB is determined to contain the surging domestic inflation.
    • In a very hawkish speech to the market, the SARB surprised the market as it tries to stay ahead of the curve.
  • Rand traders, saw this as a positive sign as it implied the SARB will maintain its carry advantage as the Fed is also expected to hike by 75 bps next week.
    • A 50 bps hike would have been a negative as the SA carry gap would have declined by 25 bps.
      • The SARB’s actions arrested this concern and the ZAR gained.
    • Elsewhere, the ECB also surprised the market with a 50 bps hike, its first hike in 11 years, as it tries to contain inflation.
    • The Dollar retreated as up to now it was flying solo with little headwind from other major central banks.
      • The decisions by the ECB and SARB would likely result in a slowdown in the Dollar rally.
    • The ZAR came under pressure in early trading as algo’s hit stops, as well as panic bond hedge buying.
      • This all reversed sharply after the MPC announcement.

Data wise, we already looking ahead to next week with another key US FOMC meeting. The Fed is expected to hike 75 bps.

  • Tuesday :

    • 16h00 : NEW US Homes Sales. Expected 675k vs 696k previous.
  • Wednesday :

    • 14h30 : US Durable goods  -0.2% expected vs +0.7%  previous (MOM)
    • 20h00 : US FED FOMC RATE DECISION ; EXPECTED +0.75  (PREVIOUS 1.75% Fed funds)
    • 20h30 : US FED Press conference : Jerome Powell
  • Today :
    • This morning we expecting a stronger ZAR, as the local unit pushes to break 17.0000.
      • With stops building up below the figure and a market sitting with quite a few “ Weak Dollar longs “,
        • A break below 17.0000 could target those stops and we could reach 16.9500 before 16.8800.
      • The ZAR also supported as Risk assets remain “BID” across the board.
        • The SP500 once approaching 4,000.
    • Even though we are bullish on ZAR, just remember we continue to trade within the broader range of 17.3000-16.8600.
      • It remains the threshold.
  • USDZAR :  Expect a range 16.9500-17.1800
    • Importers 17.0100-16.9500
    • Exporters 17.1000-17.1800 
  • EURZAR :  Expect a range of 17.2100-17.5900
    • Importers 17.3100-17.2100
    • Exporters 17.4400-17.5900
  • GBPZAR :  Expect a range of 20.2700-20.5900
    • Importers 20.3600-20.2700
    • Exporters 20.4700-20.5900


  • USDZAR 17.0500
  • EURZAR 17.3700
  • GBPZAR 20.3900


  • South Africa’s repo rate has been pushed sharply up, by 75 basis points (bps) – the steepest hike since September 2002.
    • The rate hike was announced by South African Reserve Bank (SARB) Governor Lesetja Kganyago on Thursday, moving to front-load a more hawkish increase to rein in resurgent inflation.
      • It also implies, that SA’s prime lending rate (of commercial banks) will increase to 9%.
      • While many economists originally predicted a 50bp hike for the SARB’s MPC meeting.
        • …the polling was done before the higher-than-expected June headline inflation figure of 7.4% published on Wednesday.
  • Former SA president Thabo Mbeki warned that the country could see an uprising similar to the Arab Spring, triggered by mounting discontent among South Africans.
    • Mbeki made the comments on the back of the country’s record-high unemployment, concerning crime trends and energy insecurity.
    • He said that while the government was aware of the brewing frustrations among citizens, the anger could lead to a repeat of last year’s deadly July unrest. Source  EWN
  • Pravin Gordhan,The Minister of Public Enterprises, has once again called for help in recruiting experienced engineers to solve Eskom’s power crisis.
    • Gordhan accepted a long-standing offer from trade union Solidarity to help mobilise “critical skills” which he’s previously acknowledged the ailing power utility is short on.
    • Solidarity in 2019, first  provided Gordhan with a list of more than 700 individuals it had identified who were willing and able to assist but nothing came of it at the time.
  • SARS has lodged a claim for R931.1 million against Mirror Trading International (MTI), the collapsed bitcoin investment scheme.
    • The claim was lodged earlier this month with the Master of the Cape High Court in respect of the 2019 and 2020 tax years.
    • SARS lays the blame at the feet of the company officers and liquidators for not submitting the relevant income tax returns.
    • In a statement it said  “failed to carry out their duties as the deemed public officers of MTI”.  Moneyweb


  • After a another rally in New York, Asian market saw US stock futures falling as investors digested more corporate earnings reports.
    • Nasdaq 100 futures fell 0.7%, while Dow and S&P 500 futures lost 0.2% and 0.4%, respectively.
  • The price action likely to break a hot streak on Wall Street, with the three major averages posting their third straight positive session on Thursday.
    • Still, the tech-heavy Nasdaq is on track to gain more than 5% this week, while the Dow and S&P 500 are up 2.4% and 3.5%, respectively, so far this week.


  • The US Treasury 10-year yield fell below the 2.9% mark as investors rushed to safe-haven assets.
    • Traders citing continued fears that an aggressive tightening worldwide to tame sky-high inflation will eventually tip economies into a recession.
    • The ECB surprised markets with a larger-than-expected 50 bps hike on Thursday.
    • The move ending eight years of negative rates, while revealing a new bond-buying program to tame borrowing costs for the eurozone’s most indebted countries.
  • Next week the Fed, the the world’s most influential central bank, is expected to hike another 75 bps hike in July regarded as inevitable.


  • The Dow added 162 to 32,036
  • The SP500 added 39 to 3,998
  • The Nasdaq  added 161.96 to 12,059

Futures Trading:

  • image : Trading economics


  • Asian markets higher, following another rally in New York.
    • In Japan, the Nikkei gained 0.4% to close at 27,915 posting its biggest weekly gains since March. Traders citing a change in sentiment as it was helped by a boost from Wall Street.
      • Also the Bank of Japan remained an outlier by retaining its easy monetary policy.
      • Investors also watched for market reaction after data showed Japanese core consumer prices inched up in June and stayed above the BOJ’s target for the third straight month.
      • Shipping firms led the advance on Friday but investors remained cautious ahead of more corporate earnings and the Federal Reserve policy meeting next week.
    • In Australia, the ASX 200 traded flat at 6 ,792 but closed the week 2.8% higher.
      • Traders citing upbeat corporate earnings and improving risk sentiment prompted bulls to step in this week.
      • However investors remained cautious about the prospect of a global recession as major central banks raise interest rates to tame surging inflation.
      • Financial stocks advanced on Friday, with the “Big Four” banks rising between 0.2% to 2.8%
  • Crude futures rose above $97 per barrel on Friday after falling for two straight sessions.
    • Traders cited another volatile week marked by persistent supply-side issues. In addition, weakening US gasoline demand and mounting risk of a global economic slowdown.
    • President Joe Biden failed to secure a pledge from Arab leaders this week to pump more oil.
      • Also , Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin reportedly discussed continued cooperation within OPEC+ in a phone call on Thursday. Energy News
  • Gold rallied more than 1% to hit $1718/oz after the ECB surprised the market with a larger than expected 50 bps hike.
    • This resulted in a drop in the Dollar and provided support to Bullion.
    • The Fed however remains on track to hike by 75 bps, although some had called for 100bps.
    • Markets will be watching for the US central bank’s forward guidance on rates, as any hawkish statement could push the dollar higher and hurt gold prices. Kitco metals
  • The Dollar declined to trade below the 107 handle, settling at 106.80.
    • The US central bank is on track to raise interest rates by another 75 basis points next week after pushing back against expectations of a bigger 100 basis point increase.
    • Markets will be watching for the Fed’s forward guidance on rates, as any hawkish statement could push the dollar higher and hurt other major currencies.
    • The greenback fell on Thursday after the European Central Bank raised rates by a larger-than-expected 50 basis points for the first hike since 2011.
    • However, dollar dips are seen as short-lived given the US’s relative economic strength and more aggressive tightening path. FX news

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