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Morning NOTE

25 August 2022


The ZAR managed to strengthen to open at 16.8700 on the back of improved Risk sentiment and profit-taking on ZAR shorts.


  • The Rand strengthened 1.51 % after a solid performance from Risk assets overnight.
    • Markets rebounding on the back of solid earnings reports out of the world’s largest economy.
      • Technical traders also pointing to a market that has gone “too fast, too far & too soon” and remained in “oversold territory”.
      • This as traders debate whether the Fed will deliver another 75 or 50 bps hike in September.
  • In addition, the USA continues to deliver “softer than expected” economic data with the latest print for US Durable goods orders also disappointing to the downside.
    • Analysts citing, New orders for US manufactured durable goods came in flat at 0%, disappointing market expectations of a 0.6% increase.
    • It was the first month in five that orders showed no growth due to a 0.7 percent decline in orders for transport equipment.
  • The data causing for some optimism on the Equities (risk asset) side and profit-taking on a very strong Dollar.
  • The Rand and other EMFX all benefitting.
  • Earlier in the day SA inflation (7.8% YOY) , once again remained above the SARB’s  6% upper band level.
  • With the ZAR FRA markets pricing in more than 50 bps increase at the next MPC i.e. ( 65 bps at the time of writing ).
  • This indicates a market expecting a hawkish SARB and this likely to provide support to ZAR.
  • Risk however, remains with the FED and the central banker conference at Jackson hole Wyoming.
  • Traders expecting Fed chair, Jerome Powell, to reinforce a strong commitment to fight inflation.
    • With softer economic data, traders remain divided between a 50 and a 75 bps hike in September, creating extreme levels of market volatility.

Significant Market Data

  • Thursday
    • 14H30 : US GDP consensus for another contraction of -0.8% vs -1.6% previous ( **This will be another market moving event).
  • Friday



  • Risk assets on the front foot after strong recovery in New York,
    • Asian markets all trading higher ahead of the Fed’s Jackson hole conference.
    • Softer economic data pairing Hawkish rate bets as the US 10YT yield drifted lower to 3.08%.
  • We expect a Stronger session for the ZAR today.
  • Both G7 & EMFX find some support against a rampant Dollar.
  • The ZAR also finding support after higher than expected SA CPI pointed to a hawkish SARB MPC with scope for more hikes.
    • Currently SA still presents negative Real yields ( i.e. inflation greater than nominal rates).
      • This give the SARB scope to hike more which will be ZAR supportive.
  • The national shutdown having zero effect on market sentiment. (NB : monetary policy remains the key driver for currency markets)

Expected Ranges

  • USDZAR :  Expect a range 16.7500-17.0300
    • Importers 16.8300-16.7500
    • Exporters 16.9400-17.0300
  • EURZAR :  Expect a range of 16.7600-17.0200
    • Importers 16.8100-16.7600
    • Exporters 16.9100-17.0200
  • GBPZAR :  Expect a range of 19.8600-20.0800
    • Importers 19.9200-19.8600
    • Exporters 20.0000-20.0800


  • USDZAR 16.8700
  • EURZAR 16.8400
  • GBPZAR 19.9500


  • After protests from unions regarding the costs of living as well as the sale of failing SOE’s ,
    • …Minister in the Presidency Mondli Gungubele, told Cosatu and Saftu members that government does not intend to sell Eskom.
      • Cosatu and Saftu said that they had planned a national shutdown.
      • But while this didn’t happen, they managed to gather thousands of workers to put forward a series of demands.
      • The demands  including calls to slash the cost of fuel and halt any plans to privatise Eskom. EWN
  • Economists said that while SA’s inflation rate was a concern, it remained significantly below its global counterparts.
    • The country has recorded a 13-year record in inflation of 7.8% for July.
      • That is up from 7.4% in the previous month and at a record high above the SARB’s target of between 3% and 6%.
      • Transport, food and non-alcoholic beverages are all drivers of inflation.
    • Stanlib chief economist, Kevin Lings, said that the current rate would not persist.
      • “Hopefully, during the course of next year, inflation starts to moderate meaningfully.
      • And we’re reasonably confident that by the end of next year, inflation will be back inside the target and below 5%.  Source : Business day
  • Bidcorp  announced an earnings increase of nearly 58% .
    • The group saying it has closed its books on the two difficult financial years of 2020 and 2021 in exceptional style.
    • Earnings setting  a new record of R4.9 billion in the year to end-June 2022.
    • This is around 10% higher than in the pre-pandemic 2019 financial year. Moneyweb


  • Stocks staged a rally in New York on the ahead of more corporate earnings reports.
    • Technical traders also pointing to oversold market conditions.
    • In regular trading on Wednesday, the Dow and S&P 500 gained 0.18% and 0.29%, respectively, while the tech-heavy Nasdaq also gained 0.41%.
    • This morning US stock futures remained well bid, as traders assessed a fresh batch of earnings reports.
  • Also investors keenly awaiting the start of the Jackson Hole economic symposium later in the global day.


  • The yield on the 10-year US Treasury note declined to 3.08% after trading as high as topped 3.11% earlier in the session.
    • Softer economic data causing hawks to take some money off the table with profit-taking,
    • However, the yield remains above the key 3% level on the back of multiple Fed policymakers noting the need to move borrowing costs to a restrictive territory.
    • The view remains that inflation needs to be at 2%, even if it induces a recession, thus erasing previous bets of a dovish pivot.
  • Investors expect Fed Chair Powell’s speech on Friday during the annual Jackson Hole symposium to echo the hawkish stance of the central bank.


  • The Dow gained 59 to 32,969
  • The SP500 added 12 to 4,140
  • The Nasdaq  added 50 to 12,431

Futures Trading:

  • image : Trading economics


  • Asian markets all higher on the back of a stronger close in New York.
    • In Japan, the Nikkei 225 rose 0.5% to 28,470, pausing this week’s decline.
      • Traders noting a bounce in nearly all sectors as the BOJ stressed the need to maintain massive stimulus to support a fragile economic recovery.
        • The BOJ cited fresh Covid outbreaks, supply disruptions and slowing global demand as some of the risks that justify keeping monetary policy ultra-loose.
      • Investors are also bracing for Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium on Friday that could guide the outlook for US rate hikes.
    • In Australia, the ASX 200 Index gained 0.8% to 7,050. The index rising for the 2nd straight session as investors welcomed upbeat corporate earnings.
      • The rebounding in commodity prices also supporting commodity stocks.
      • Energy and mining stocks also gained on stronger commodity prices, including Woodside Energy (2.3%) and BHP Group (1%). Reuters
  • Crude oil rallied for the 3rd straight day. The US benchmark, WTI crude above $95/bl on Thursday.
    • Traders citing a return of a tightening supply outlook after Saudi Arabia flagged potential output cuts by OPEC+ earlier this week to deal with market volatility.
    • OPEC worried about the addition of Iranian crude to market supply that could push prices lower.
    • OPEC sources telling Reuters that any cuts are likely to coincide with a return of Iranian oil to the market.
      • Tehran will reportedly seek to replace Russian oil in Europe, while Moscow approached several Asian countries to explore long-term oil contracts at steep discounts.
      • On the demand side, official data showed that the US exported a record amount of crude and refined products last week. Gulf Energy news
  • Gold prices rose above $1,750/oz after a decline in US yields and a softer Dollar supported the Yellow metal.
    • Traders assessed whether the US Federal Reserve will move ahead with aggressive rate hikes in the face of a weakening economy.
    • New orders for US-manufactured durable goods were unchanged, disappointing expectations for a slight increase following a healthy growth in June.
    • Focus shifts to Chair Jerome Powell’s speech at the Jackson Hole symposium on Friday.
    • Markets are also factoring in hawkish remarks after other Fed officials signalled a commitment to the fight against inflation. Kitco metals
  • The US dollar declined to 108.3, after reaching near 20-year highs.
    • Traders avoided making big bets ahead of Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium.
    • It is expected that Powell, could add more certainty as to the Fed’s rate hike path.
    • Investors are also assessing whether the Fed will move ahead with its aggressive plan to stamp out inflation as recent weakness in US economic data complicated the picture.
    • Markets pricing in another 75 hike, but weak data complicating things with some traders betting on 50 only.
    • The Dollar likely to sway either way.

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