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Morning NOTE

24 August 2022


The ZAR weakened back above 17.0000, after more Hawkish comments from Fed officials.



  • The Rand staged a late session recovery to hit 16.9000 before retracing back above 17.0000.
  • The rally on the back of a feeble attempt at “turn-around Tuesday”.
    • The move ending swiftly after Fed officials said they were in favour of “higher rates for longer” if inflation persists.
  • Locally, SA inflation for July printed slightly higher than expected at 7.8% vs 7.7%, Core inflation also printed higher than expected at 4.6% vs 4.5%
    • This is higher than the 3%-6% inflation band of the SARB, which implies that they will hike interest rates again at the next MPC meeting
    • The ZAR needs another hike to stage any sort of recovery vs a rampant Dollar.
    • Recall: The annual SA CPI rate rose to 7.4% in June of 2022.
      • It was up from 6.5% in May and above market expectations of 7.2%.
  • Later in the week, Jackson hole also looming large as Investors expect 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;

  • 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.
  • The same story continues, RATES higher for longer, continues to support the Dollar.
  • In this environment there is not much for other currencies as they all remain at the mercy of the Fed & Greenback.
    • The ZAR continues to trade on the back this fundamental back drop.
    • ***The higher than expected print will likely be ZAR supportive, the print is however only slightly higher so we do not expect a large effect.

Expected Ranges

  • USDZAR : Expect a range 16.8700-17.1000
    • Importers 16.9500-16.8700
    • Exporters 17.0600-17.1000
  • EURZAR : Expect a range of 16.7600-17.0300
    • Importers 16.9000-16.7600
    • Exporters 16.9800-17.0300
  • GBPZAR : Expect a range of 19.9600-20.2500
    • Importers 20.0500-19.9600
    • Exporters 20.1500-20.2500


  • USDZAR 16.9800
  • EURZAR 16.8600
  • GBPZAR 19.9600


  • Nationwide strike !

    • Cosatu and Saftu, are expected to put their differences aside on Wednesday and take to the streets over the increasing cost of living.
      • Members of the country’s two largest trade union federations, said demonstrations have been organised in various cities across the country’s nine provinces.
      • Saftu secretary-general, Zwelinzima Vavi, said that they would also use Wednesday to hold employers accountable. EWN
    • However, ahead of a planned national stayaway on Wednesday;
      • The SA government warned participating public servants that they won’t be paid for the day.
      •  In a statement, the Department of Public Service and Administration (DPSA) said ;
      • “… employees who deliver essential services are not allowed to participate at all during working hours..” News24
  • Zimbabweans at risk of deportation prepare to take on banks, big corporates
    • Hundreds of thousands fear losing their jobs and having their bank accounts closed when exemption permit scheme ends in December.
    • Lawyers representing the permit holders say they are preparing to haul banks to court to prevent them from closing the accounts of any ZEP holder.
  • Sasol, the world’s biggest producer of fuel products and chemicals from coal, said it benefitted from higher energy and chemicals prices.
    • Sasol posted a 147% jump in full-year core profit on Tuesday boosted by higher fuel and chemicals prices.
    • The results allowing the firm to declare its first dividend since 2019. Moneyweb


  • US stock futures continued the decline following Wednesday’s down day on wall street.
    • Fresh hawkish remarks from another Federal Reserve official stalling an attempt at a rally.
  • In regular trading on Tuesday, the Dow and S&P 500 lost 0.47% and 0.22%, respectively. In contrast the tech-heavy Nasdaq ended flat.
    • All three benchmarks are hovering at their lowest levels in at least two weeks as mounting recession risks left the market divided on the scale of US rate hikes moving forward. CNBC


  • US 10 Year Note Bond Yield was 3.03 percent as investors once again come to terms with more Fed rhetoric.
    • Earlier Fed officials once again told the market to expect rates higher for longer.
  • Across the pond in the UK, Britain’s 10-year surged past 2.4% for the first time in more than seven weeks.
    • Traders betting the BOE will continue its aggressive tightening and deliver a back-to-back 50 bps rates increase.
    • The central bank sees inflation peaking at 13.3% in October and projects the country to enter a recession in Q4 and lasting for five quarters. Bloomberg


  • The Dow declined 154 to 32,909
  • The SP500 fell 9.26 to 4,128
  • The Nasdaq was flat at -0.27 to 12,381

Futures Trading:

  • image : Trading economics


  • Asian markets trading lower across the region after another down session on Wallstreet. Stocks erasing earlier gains in New York after Fed officials re-affirmed their commitment to bring down inflation.
    • In Japan, the Nikkei 225 Index declined 0.3% to 28,360, as Japanese stocks continued this week’s losing streak.
      • Tech once again leading the market lower.
      • Traders citing, the recent Fed comments on higher rates for longer also disturbing investors confidence.
    • In China, the Shanghai index fell 1% to 3,250, hitting its lowest levels in two weeks. Traders citing dwindling risk sentiment, as a catalyst for a sell-off in Chinese growth stocks.
      • Investors were also kept on edge after Minneapolis Fed President Kashkari,
        • said “…the US central bank would have to be more aggressive for longer, if inflation turns out to be much more embedded than markets appreciate…” Reuters
    • In Australia the ASX200 bucked the trend an rallied on the spike in commodity prices after the Saudi’s announced possible cuts to supply.
      • The ASX 200 rose 0.5% toward 7,000, ending a two-day decline, lifted by gains in energy and mining stocks amid a rebound in commodity prices.
      • Energy stocks gained as oil prices jumped overnight after Saudi Arabia warned of possible OPEC+ output cuts to support prices. Bloomberg
  • Crude oil  held its gains for both the WTI contract trading at $93.50/bl and the North Sea Brent contract trading just below $100/bl.
    • The move comes after threats from the Saudi’s to cut production, as well as an unexpected drop in US inventories.
    • Earlier, the API reported that US crude stockpiles declined by 5.632 million barrels last week. It was much larger than expectations for a 900,000 barrel drop.
    • Then Saudi Arabia announced possible supply cuts from OPEC+ to counter downward pressure on oil prices.
      • The result oil prices rallying nearly 4% on Tuesday.
    • However, crude is still down about 25% from the June high on growing fears that a global economic slowdown would dampen consumption.
    • Traders citing the major central banks draining  demand with aggressive rate hikes to combat inflation, as the main reason. Gulf Energy News
  • Gold prices recovered to trade at $1747/oz after initially dropping to $1727/oz.
    • Bullion ignoring some fresh hawkish comments from a Fed officials ahead of this week’s Jackson Hole symposium.
      • Earlier, Minneapolis Fed President Neel Kashkari said his biggest fear was underestimating the extent of price pressures.
        • He added  the central bank would have to be more aggressive for longer if inflation persists.
      • Traders are also looking ahead to Fed Chair Jerome Powell’s speech later this week that could signal how high US borrowing costs may go.
        • However, the yellow metal found support after weak US economic data weighed on the Dollar.
        • The data leaving Gold traders confused on the potential scale of Fed rate hikes moving forward. Kitco Metals report.
  • The US dollar bounced back to around 108.7 on Wednesday.
    • The Greenback once again rising towards 20 year highs.
    • More Fed officials rhetoric supporting the Dollar.
      • The Minneapolis Fed President stressing the need for more aggressive rate hikes to control inflation outweighed weak US economic data.
    • Currency traders are also gearing up for Fed Chair Jerome Powell’s speech at the annual Jackson Hole symposium.
    • Markets remain undecided on whether the Fed would deliver a third straight 75 basis point or a milder 50 point increase in September. Reuters FX
  • The Euro remained below $1 in the fourth week of August, the lowest level since late 2002, as recession fears in Europe re-emerged again with a deepening energy crisis.
    • Also, flash August Global S&P PMIs showed business activity across the Euro Area contracted for the second straight month.
    • Germany showed the sharpest decline in output since June 2020.
    • Investors now await the ECB monetary policy meeting accounts on Thursday to sound hawkish.
    • Recall in July the ECB surprised markets and hiked interest rates by 50 bps as inflation in the bloc continues to break record levels. FX NEWS

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