The ZAR continues to trade inside its weekly range of 15.8200-16.0800, on the back of uncertainty around Fed policy and Economic growth.
- The Rand maintained its range around the pivot R16.0000/$ following comments from Fed Chair Jay Powell, that the FOMC will continue to hike rate to bring inflation under control.
- However, with oil prices falling for a second straight week on the back demand concerns, and the strong possibility of a looming recession, rates might have peaked.
- Brent and WTI now looking towards a 2nd straight week of losses.
On the data front, nothing significant today, however next week;
- We have US GDP data with previous Q1 at +6.9% QoQ , vs -1.5% expected QoQ (a significant slowdown in the world’s largest economy).
- Also US Core PCE (The fed’s inflation gauge) +5.1% QoQ vs 5% previous.
- On the local front we have
- SA Money supply previous +7.5%
- SA PPI previous +13.1% YoY
- SA trade balance May previous + R15.49bn
- Today :
- After another week of FED speak and a 30 cents range, traders are looking forward to the weekend.
- Local interbank Rand traders all saying that the drop in volatility a direct cause of the uncertainty around Powell testimony.
- Coupled with a significant drop in oil prices and we have Risk assets rebounding, as traders BET inflation might have peaked
- This assumption leads to the conclusion the Fed is behind the curve.
- With Risk rallying, it is highly unlikely that the ZAR will weaken significantly and the 16 pivot or above are good levels for EXPORTERS.
- Also SARB risk after the high inflation numbers will be ZAR supportive.
- USDZAR : Expect a range 15.8200-16.0600
- Importers 15.9000-15.8200
- Exporters 15.9800-16.0600
- EURZAR : Expect a range of 16.7100-16.9200
- Importers 16.7500-16.7100
- Exporters 16.8500-16.9200
- GBPZAR : Expect a range of 19.4600-19.6800
- Importers 19.5100-19.4600
- Exporters 19.6300-19.6800
- USDZAR 15.9300
- EURZAR 16.7800
- GBPZAR 19.5600
- Eskom warned that loadshedding will continue until Sunday after the breakdowns continues to wreak havoc on the SOE’s ability to deliver power.
- In addition, ESKOM said the persisting protests at the various power stations will likely result in a delay in the resumption of power.
- Eskom reiterated that the provision of electricity is an essential service and industrial action is not permitted.
- “Eskom appeals to its labour partners and striking employees to embrace the higher purpose of putting the people of South Africa first, respect the law and to desist from illegal and undemocratic conduct.”
- MASKS : Government’s decision to scrap COVID-19 restrictions, particularly mask-wearing, after more than two years has been widely supported.
- Health Minister Joe Phaahla on Thursday made a formal announcement on government’s move to repeal the country’s last remaining coronavirus mitigating regulations.
- Officials point to the a drop in daily cases as well as a significant drop in deaths and hospitalisations.
- Zondo urged the SA financial watchdog to investigate banks over stolen state capture billions.
- The Financial Intelligence Centre (FIC) should urgently review if SA banks complied with their obligation to report billions worth of suspicious state capture transactions laundered through their financial systems.
- Earlier Nedbank had been implicated for its role and relationship with Gupta linked firm Regiments Capital. News 24
- US stock futures climbed higher on Friday after the major averages rebounded in the previous session.
- Wall Street looked to make a strong weekly comeback following an extended sell-off.
- Futures contracts tied to the three major indexes were up between 0.6% to 1%. So far this week, the Dow is up 2.64%, the S&P 500 gained 3.29% and the Nasdaq Composite is higher by 4.02%, with all three averages set to snap three-week losing streaks.
- Recessionary fears remain a top concern among investors amid a backdrop of high inflation and aggressive rate hikes.
- The 10-year US Treasury note yield extended its decline towards the 3% mark.
- The benchmark reaching a level not seen in two weeks, as investors continued to pile into safe-haven assets amid concerns that tightening financial conditions could tip the US economy into a recession.
- The Dow gained 194 to 30,677
- The SP500 added 35 to 3,795
- The Nasdaq added 179 to 11,232
- image : Trading economics
- Asia markets higher, as the Nikkei 225 rose 1.23% to close at 26,492, following an upbeat overnight session on Wall Street.
- In Japan, the major technology and healthcare stocks leading the advance.
- However, Investors also continued to weigh fears about a possible global recession and digested Japanese data which pointed to still elevated levels of inflation in the country.
- The benchmark indexes gained about 2% this week, recouping some losses from last week.
- In Australia, the ASX200 rose 0.77% to close at 6,759 as gains in technology shares gained
- Crude oil hit by demand concerns with both Brent and WTI on course for a 2nd straight week of losses.
- Brent crude traded below $110 /bl and were on track to decline for the second straight week, pressured recently by fears that aggressive monetary tightening in major economies.
- The policy firmly aimed at curbing soaring inflation but that could lead to a global recession and dampen oil demand.
- US manufacturing and services PMIs released Thursday came in well below expectations, raising fears of slowing US economic activity.
- On the Supply ;
- investors remained cautious on fuel supply remains despite agreeing to boost output equivalent to 7% of daily global demand in July and August.
- Up to now, OPEC+ has been struggling to hit their increase targets due to underinvestment in oilfields by some members and lost Russian supply. Energy News
- Gold flat-lined around $1,825 /oz on its way to a 2nd straight week of losses.
- The yellow metal continues to face headwinds in the face of the major central banks, who continues to hike interest rates.
- Powell, in a testimony to Congress on Thursday, reiterated that his commitment to reining in 40-year high inflation is “unconditional”.
- He even acknowledged that sharply higher interest rates may push up unemployment.
- Fed Governor Michelle Bowman also backed raising interest rates by 75 basis points again in July and following that with a few more half-point rate hikes.
- Gold is often viewed as a hedge against inflation and a safe haven asset during economic crises, but higher interest rates raise the opportunity cost of holding non-yielding bullion. Kitco Metals
- The US dollar traded at 104.2 on Friday, holding on to its recent declines.
- The lower Treasury yields lower, amid growing concerns about a possible recession.
- However, Fed Chair Jerome Powell said in a testimony to Congress that the central bank is fully committed to bringing prices under control, even at the risk of an economic downturn.
- He acknowledged that a recession was “certainly a possibility,” reflecting market concerns that the Fed’s aggressive monetary tightening would hamper growth.
- Powell also said that the Fed will keep raising interest rates following a 75 basis point increase last week, the largest since 1994. Fx news
COVID-19 SOURCE https://www.worldometers.info/coronavirus/
Cases / Deaths / Recoveries
- WORLD 546,710,803 / 6,345,918 / 522,359,680
- USA 88,443,398 / 1,039,771 / 84,153,379
- SA 3,989,007 / 101,697 / 3,873,790
- SA removed it’s Covid-19 mask mandate, and citizens will no longer be required to wear masks.