View this email in your browser

Morning NOTE

25 July 2022


The ZAR continued to trade stronger on the back of momentum gained following the SARB’s 75 bps rate hike.


The Rand continued its gained to reach 16.7700 in late Friday trading in New York as the SARB rate hike weighed heavily on ZAR shorts.

  • The SA MPC surprising markets and the 75 bps hike, triggering ZAR short seller stops.
  • The unit also benefitting from a bounce in risk assets (last week),  ahead of this week’s key FOMC meeting.
    • The Fed is widely expected to raise rates by 75 bps, as it continues to combat 40 yr high inflation.
    • The Dollar rally stalled, after initially gaining on fears of a 100bps hike, until the idea was dismissed by notable FED governors, Bullard and Bostic.
  • Locally, Ramaphosa kicked off his bid for re-election at the ANC’s elective conference at the end of the year.
    • He started in KZN, a notable Jacob Zuma stronghold in what was seen as a hostile reception.
    • In addition, after being criticitzed by Thabo Mbkei, about his lack of progress on a plan to boost economic growth, he responded,
      • By stating “… the government is making progress on a plan to boost economic growth..”

On the data calendar, the FOMC sticks out as the most important event of the week.

  • Wednesday

    • 20H30 : FOMC MEDIA STATEMENT (Much attention will be given to the language as to the Fed’s future rates trajectory).
  • Thursday

    • 11h30 : SA PPI (producer inflation ) MOM +1.7% EXPECTED vs PREVIOUS 1.8%
    • 11h30 : SA PPI (producer inflation ) YOY +15.8% EXPECTED vs PREVIOUS 14.7%
    • 14H30 : US GDP GROWTH 0.4% EXPECTED vs – 1.6% PREVIOUS
  • Friday

  • Today :
    • This morning we expecting some ZAR weakness.
    • Traders tracking global markets that appear nervous ahead of the FED’s FOMC rates decision on Wednesday.
    • At the open we trading at 16.8500, with USDZAR dips presenting importers opportunities to cover short term exposures.
      • Technically allowing for some Dollar buying, with levels close to R17/$ great opportunities for exporters to SELL
    • Although the SARB’s actions indicated a stronger ZAR going forward, FED RISK remains real and it is unlikely the ZAR will power ahead before the FOMC.
    • The local unit briefly traded below 16.8600 (to 16.770) the lower band of the broader range of 17.3000-16.8600.
  • USDZAR :  Expect a range 16.6700-17.000
    • Importers 16.7700-16.6700
    • Exporters 16.8900-17.0000
  • EURZAR :  Expect a range of 17.0600-17.4400
    • Importers 17.1200-17.0600
    • Exporters 17.2600-17.4400
  • GBPZAR :  Expect a range of 20.0000-20.3600
    • Importers 20.1100-20.0000
    • Exporters 20.2400-20.3600


  • USDZAR 16.8500
  • EURZAR 17.1800
  • GBPZAR 20.1700


  • Under pressure SA president, Cyril Ramaphosa, said the government is making progress on a plan to boost economic growth.
    • This after he was criticised by one of the nation’s former leaders for failing to deliver the plan.
    • Ramaphosa on February 10 pledged to provide a comprehensive social compact — in cooperation with business, labour unions and civil society — within 100 days.
    • Former President Thabo Mbeki last week slammed Ramaphosa for not fulfilling that promise.
    • Mbeki warned that growing poverty and lawlessness in the country risks triggering protests that engulfed the Arab world a decade ago. Source : Moneyweb
  • Business SA has warned against the governments plans to implement the BASIC INCOME GRANT.
    • In addition, Intellidex, warned in a study that it would result in a faster emigration of SA tax payers.
      • The study added, that SA up to now has been ranked as the world’s most unequal nation, would not benefit as it would slow economic growth.
    • SA President Cyril Ramaphosa have said the measure, the biggest of its kind globally if implemented, aims to alleviate poverty.
      • Business organisations have cautioned against it, saying it’s unaffordable. IOL
  • Sasol, SA’s largest fuel producer, announced that Crude supply to its Natref refinery has been “partially restored”
    • Sasol declared force majeure on the supply of petroleum products on 15 July, due to delays in delivery in crude oil shipments to Natref.
    • Sasol also said that its fuel production dropped 10% in the financial year to end in June.
    • This was mainly due to a postponed annual plant shutdown, coal supply and quality challenges and operational instabilities. News24
  • In a worrying development, the UN released a report the implicated SA.
    • The report stated that Islamic State (ISIS), were getting financial support from South Africa.
    • The document, stated, “ highlighted the emerging importance of South Africa in facilitating transfers of funds” from IS leadership to affiliates on the continent, the UN said.
    • “The monitoring team is aware of several large transactions totalling more than $1 million.”  News24


  • US stock futures were lower in early trading on Monday as investors brace for a busy week of market-moving catalysts, headlined by the Federal Reserve meeting.
    • This is followed by GDP data and big tech earnings.
  • Last week, the major averages closed the week higher as investors speculated on a market bottom.
    • This resulted in gains across the board with the Dow up 1.95%, while the S&P 500 and Nasdaq rose 2.55% and 3.33%, respectively.
  • The Fed is expected to raise rates by another 75 basis points at its July 26-27 meeting.
    • Investors will get a look at advance estimates for Q2 GDP on Thursday amid concerns over a potential recession.
    • More than a third of S&P 500 companies will also report earnings this week.
  • The market will however pay attention to the mega cap tech names including Apple, Microsoft, Alphabet, Amazon and Meta Platforms taking centre stage.


  • The yield on the US 10-year fell below the 2.8% mark, a level not seen in 2 months.
  • Buying of US treasuries ensued  as investors rushed to safe-haven assets amid lingering of a global economic recession.
    • Investors citing aggressive FED tightening.
    • The Federal Reserve, the world’s most influential central bank, so far has raised rate by 1.5 % this year, with another 75 bps hike in July regarded as inevitable.
    • While such an aggressive tightening should be the key to bringing down 40yr high inflation,
    • Investors have grown concerned that it will also tip the world’s largest economy into a recession.


  • The Dow fell 137 to 31,899
  • The SP500 declined 37 to 3,961
  • The Nasdaq declined 225 to 11,834

Futures Trading:

  • image : Trading economics


  • Asian markets mostly lower this morning, following Friday’s late drop on Wallstreet as traders booked profits ahead of this week’s key FOMC meeting.
    • The Nikkei leading the decline while Shanghai (China) and the Kospi (S.korea) all traded lower.
    • In Japan, the Nikkei 225 fell 0.77% to close at 27,699 after booking strong gains last week.
      • Traders turned cautious ahead of the US Fed meeting where it is expected to deliver another 75 basis point rate hike to combat inflation.
      • Markets are also bracing for second quarter US GDP data due on Thursday that is expected to confirm a slowdown in the world’s largest economy.
      • Japanese Technology shares led the decline as they tracked their US peers lower.
    • In Australia, the ASX traded flat as commodity gains were offset by tech losses.
      • The ASX 200 Index was flat (- 0.02%) to close at  6,790 as investors assessed mixed corporate results from major domestic companies.
      • The upcoming US FOMC meeting also kept sentiment in check.
      • Technology stocks weighed on the index, with losses from Xero (-1.1%), offsetting gain from mega miners Rio Tinto (0.9%) and BHP Group (1.6%). Source : Reuters
  • Brent crude oil, fell below $103 per barrel on Monday, sliding for the fourth straight session.
    • Traders cited fears that a global economic slowdown will hurt energy demand and it outweighed ongoing supply tightness.
    • The US Federal Reserve is expected to deliver another rate hike this week, that some fear would cause a demand destruction.
    • Also, estimates for Q2 US GDP due on Thursday will give investors insight on the state of the world’s largest economy.
    • However, Supporting prices were, Biden’s failure to secure a pledge from Arab leaders to pump more oil. Source : Energy News
  • Gold traded around $1,725/oz after rising for 2 straight sessions.
    • The safe-haven Bullion benefited from recent weakness in US Treasury yields amid renewed fears about a potential recession.
    • The Fed is expected to deliver another rate hike this week, that some fear would tilt the economy into recession.
    • BUT, Gold remains 16% off its high’s as the Fed’s aggressive interest rate hikes and the Dollar’s relative strength continued to pressure bullion demand. Source : Kitco Metals
  • The US dollar flat-lined around 106.6 after losing more than 1% last week.
    • The Buck previously gained  support from Fed rate hikes and safe-haven bids driven by global recessionary concerns.
    • Although 75 bps is largely priced in the markets will focus on how hawkish Fed Chair Jerome Powell sounds as he aims to get some type of soft landing.
    • Second quarter US GDP due on Thursday will give investors more insight on the state of the world’s largest economy. Source : Forex News
  • Wheat prices

    • Wheat prices were up almost 3% to $7.8 per bushel on Monday, after Russia attacked the sea port of Odesa during the weekend.
      • On Friday, wheat prices fell almost 6% to low levels prior to Russia’s invasion of Ukraine.
        • The drop after Russia and Ukraine signed an agreement to resume grain exports from Ukrainian ports in the Black Sea.
        • The safe trade corridor will allow Ukraine to export over 20 million tonnes of grain reported to be accumulated in port silos since the war started on February 24.
        • This would also allow stockpile space for the coming wheat harvest. Source : CME news

    • World leaders swiftly condemned Russian missile strikes on a Ukrainian port.
      • The dramatic revelation comes on the heels of a U.N.-brokered deal that secured a sea corridor for grains and other foodstuff exports.
      • The strike on Odesa, Ukraine’s largest port, showed another failed effort to mitigate a mounting global food crisis.
      • Some leaders going so far as to say Putin cannot be trusted.
    • On the back of the  UN “Deal”  Wheat prices initially fell to $7.6 a bushel,
    • But has since rebounded nearly 3% at the open of the European trading session to $7.90/bushel.

Copyright ©
2022 RussellStone Treasury
All rights reserved.

Our mailing address is:

Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.