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
- 10H00 : SA INFLATION PPI JULY 17.6% YOY EXPECTED
- 10H00 : SA INFLATION PPI JULY 1.95% MOM EXPECTED
- 14H30 : US GDP consensus for another contraction of -0.8% vs -1.6% previous ( **This will be another market moving event).
- 16H00 : FED CHAIR JEROME POWELL SPEAKS AT THE JACKSON HOLE WYOMING CENTRAL BANKERS CONFERENCE
- 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)
- 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
- 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.