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Morning NOTE

23 August 2022


The ZAR managed to consolidate around the R17/$ handle in the face of a Dollar storm as global risk assets came under pressure.


  • The Rand weakened against the US dollar, but somehow bucked the losing trend, to end the session below R17/$.
    • The local unit’s weakness against the Dollar being slowed as the ZAR benefits against the two other major crosses i.e. EURZAR and GBPZAR.
    • Right now it appears that the Euro and GBP, are losing ground faster vs the Buck than the Rand.
    • We have the SARB to thank for that, as our monetary policy remains lockstep with the Fed, whereas the ECB remains behind the curve.
    • However the trend remains in favour of a weaker ZAR, ahead of this week’s Jackson Hole symposium.
  • The theme continues around the Fed’s ultra-hawkish stance and the chances for a 75 bps hike in September.
    • As mentioned above, The Euro one of the biggest victims of the day as the single currency traded below parity (0.9915 at the time of writing), for the first time in 20 years.
      • Concerns about a more aggressive Fed vs the ECB, as recession fears continue to grow in Europe.
        • Also, the Energy (natural gas) crises continues to worsen.
        • Earlier Russian energy exporter Gazprom said it would shut down the Nord Stream pipeline to Germany for 3 days of maintenance.
      • In addition, US natural gas futures topped the $9.80 mark for the first time since July 2008 on the back of a deepening energy crisis in Europe. 
  • Traders now firmly focussed on local inflation data but also the upcoming annual Jackson Hole symposium later this week.
    • Investors expecting the Fed and in particular Jerome Powell, to reinforce a strong commitment to fight inflation.
    • Markets remain divided between a 50 and a 75 bps hike in September, creating extreme levels of market volatility.

Significant data this week;

  • Tuesday
    • 11H30 : SA unemployment Q2 : 35% EXPECTED
  • Wednesday
    • 10H00 : SA CORE inflation data CPI JULY 4.5% EXPECTED
  • Thursday
    • 10H00 : SA INFLATION PPI  JULY 17.65% yoy EXPECTED
    • 14H30 : US GDP consensus for another contraction of -0.8% vs -1.6% previous ( **This will be another market moving event).


  • Risk assets remain on the back foot with Equity futures all lower in early Asian trading. In addition, we have a rampant US dollar.
    • The Dollar index above the 109 mark. The US currency fast approaching the highest level since September 2002.
    • Investors have increased bets that the Fed will move on with its aggressive tightening plan to tame sky-high inflation.
  • In this environment we once again stress that it is unlikely we see large ZAR gains and we expect a weaker local unit.
      • Anything worse or better to have a mild effect on ZAR trading.
      • We also have SA unemployment data with analysts expecting 35% (the official rate).
      • Rising yields also not supporting markets as the US10YT once again above 3%, due to Fed rate fears.

Expected Ranges

  • USDZAR : Expect a range 16.9000-17.0600
    • Importers 16.9500-16.9000
    • Exporters 17.0200-17.0600
  • EURZAR : Expect a range of 16.7600-16.9600
    • Importers 16.8300-16.7600
    • Exporters 16.9000-16.9600
  • GBPZAR : Expect a range of 19.8600-20.0900
    • Importers 19.9300-19.8600
    • Exporters 19.9900-20.0900


  • USDZAR 16.9800
  • EURZAR 16.8600
  • GBPZAR 19.9600


  • After economists warned of Wednesday’s strike and the impact on the economy it has since emerged that;
  • Trade union federation SAFTU wants government to avail a trillion rand to meet the demands it has made ahead of its national shutdown.
    • The union will host a march on Wednesday in seven provinces, raising the plight of the unemployed, electricity tariffs and the petrol price.
  • ActionSA member and former MP, Vytie Mentor, has passed away following a long illness.
    • The 58-year-old was hospitalised for several months prior to her passing.
    • Mentor shot to fame after she alerted authorities of the enormous scale of the Gupta state capture.
    • Mentor served as an MP between 2002 and 2014 before joining ActionSA as its provincial chairperson in the Western Cape. EWN
  • In a desperate bid to add energy to the national grid, Eskom announced a new training initiative for renewables.
    • The SOE announcing it is ready to start a renewable energy training centre at its Komati Power Station in Mpumalanga.
    • CEO Andre de Ruyter said they will go out to local and international investors to fund the project.
      • The power utility has struggled to keep the lights on, due to the high demand for energy.
      • This has resulted in unplanned blackouts which affects everyone from households, to businesses, and the private sector. IOL
  • Energy expert, professor Hartmut Winkler, poured cold water on the idea of another nuclear plant.
    • He said, A new nuclear plant would take too long to build and cost too much to be a viable option
    • Winkler said expanding the life of the Koeberg Nuclear Power Station, would be a more viable option than passing the cost on to future generations.
    • Koeberg first started operating in 1984.


  • US stock futures remained under pressure  on Tuesday after a sharp sell-off that brought the major averages to their lowest in at least two weeks.
    • Recession concerns on the back of the Fed , causing investors to exit risk assets.
    • Sharp losses were also seen from mega-cap names including Tesla (-2.3%), Apple (-2.3%) and Nvidia (-4.6%).
  • Investors zooming in on the annual Jackson Hole symposium later this week.
  • Powell’s comments of particular importance.


  • The US 10 YT yield traded above the 3% mark. It was a level not seen in a month, as investors worry about the outlook for monetary policy.
    • Hawkish comments from several Fed policymakers, notably, James Bullard, echoed the Fed’s intention to tighter monetary policy.
    • He continues to lean towards another 75 bps hike in September.
    • San Francisco Federal Reserve President Mary Daly highlighted the need to push interest rates to the restrictive territory to bring inflation down to its 2% target.


  • The Dow declined 643 points to 33,063
  • The SP500 fell 90 points to 4,137
  • The Nasdaq dropped 323 to 12,381

Futures Trading:

  • image : Trading economics


  • Asian markets sharply lower following Wallstreet negative start to the week. Rate fears coupled with a global recession the driving themes.
    • In Japan, the  Nikkei 225 dropped 1.2% to 28,450, as Japanese shares followed a sharp selloff on Wall Street.
      • Traders citing mounting concerns that the US Federal Reserve will continue to aggressively raise interest rates to stamp out inflation.
      • A Fed gathering in Jackson Hole, Wyoming later this week is expected to reinforce such commitment.
      • Investors also digested data showing Japan’s manufacturing activity growth slowed to a 19-month low amid declining new orders.
      • This was followed by more poor data as  the country’s services sector also contracted for the first time since March.
    • In Australia markets were also lower, following the sell-off in New York.
      • The ASX 200 fell 0.55% to 7,008, as losses in heavyweight financials outweighed gains in commodity stocks.
      • Australian shares registered sharp losses in the financial sector were led by Macquarie Group (-3.2%).
      • Retail drinks and hotel business Endeavour Group also plunged 10% despite posting a higher annual profit.
      • Supporting the index was a return to the upside of  energy and mining stocks, after commodity prices rebounded. Bloomberg
  • Crude oil and in particular, the US benchmark WTI, gained towards $91/bl after Saudi Arabia warned that OPEC+ could reduce output to counter sharp declines in oil prices.
    • Saudi Oil Minister Prince Abdulaziz bin Salman told Bloomberg that extreme volatility and a lack of liquidity in the futures market do not reflect fundamentals.
    • He maintained their data continues to show signs of physical tightness.
      • adding the threat that of potential OPEC+ production cuts that could come at any time.
      • On the news, WTI prices reversed a sharp drop, after touching $86.28/bl on Monday.
    • Progress around reviving the 2015 nuclear accord also loomed large over the markets as a potential deal could boost Iranian oil exports by about 2.5 million bpd. Energy News
  • Gold prices traded near one-month lows below $1,740/oz, after heavy selling pressure for 6 straight sessions.
    • Bullion remains under pressure on rate fears, that the US Federal Reserve will continue to aggressively raise interest rates to stamp out inflation.
      • Last week, several US policymakers offered hawkish statements on the need for further tightening.
        • The comments driving Treasury yields higher and the expense of Gold.
    • Traders are also gearing up for Fed Chair Jerome Powell’s speech at the annual Jackson Hole symposium. Kitco Metals
  • The US dollar traded broke above the 109 mark, closing in on its highest level since September 2002.
    • Traders have now increased bets that the Fed will move on with its aggressive tightening plan to tame sky-high inflation.
    • St. Louis Fed President James Bullard was among the most hawkish policymakers last week.
    • His comments of  favouring another 75 bps hike in September, sent the Dollar soaring.
    • The most pronounced buying activity was against the Euro and the Pound, as soaring natural gas prices increased Europe’s risk of recession. Reuters
  • The Euro crossed the key 1 dollar parity, as recession fears in Europe re-emerged again with a deepening energy crisis.
    • Natural gas shortages as well as inflation and rising rates a cause for concern.
    • The ECB behind the curve relative to the Fed exacerbating the single currency’s decline.  Fx news
    • US natural gas futures topped the $9.80 mark for the first time since July 2008.
    • It was buoyed by prospects of increased demand for US LNG exports amid a deepening energy crisis in Europe.
    • Russia’s Gazprom said it would halt flows through the Nord Stream 1 pipeline to Europe for three days of maintenance at the end of August.
    • The main channel between Russia and Europe was already running at 20% capacity, putting pressure on the region as it seeks to refuel ahead of winter to avoid a natural gas shortage. Reuters

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