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Morning NOTE

26 August 2022


The ZAR strengthened after another negative US GDP print resulted in Dollar Bulls liquidating long positions.


  • The Rand benefitted from a weaker than expected US GDP report, that continues to show a contraction in the world’s largest economy.

  • The US showing another quarter of negative growth, as a combination of sticky inflation and rising interest rates affect all areas of the economy.
    • A decline in weekly jobless claims supporting claims of a strong labour market that continues to support the Fed’s view.
      • The US 10YT yield declined after weaker than expected GDP data.
        • The decline in yields stalling a rampant dollar and providing support to the ZAR and other high yielding emerging market currencies.
  • The drop in yields supportive of a broad based risk asset rally with major stock markets all higher in New York.

    • However, all focus will be on today’s Jackson hole meeting with Chairman Jerome Powell designated to speak at 16h00.
      • Slowing inflation and negative GDP causing uncertainty around the Fed’s next meeting and rate decision.
    • On the data front next week we have Non-farm payrolls.
      • The market sure to focus on the number after last month’s positive surprise caused a spike in the Dollar.

Significant Market Data

  • Friday



  • Expect some early profit taking in the ZAR, after a strong session on Thursday.
  • The ZAR gaining on the back of positive risk sentiment as stock markets rallied across the world.
  • After the ZAR gained 22 cents, it is not unusual for a bit of Friday profit taking.
  • Traders aware of Jackson hole later in the day, so highly unlikely we see strong gains from here on in.

Expected Ranges

  • USDZAR :  Expect a range 16.6100-16.8900
    • Importers 16.7100-16.6100
    • Exporters 16.8200-16.8900
  • EURZAR :  Expect a range of 16.6100-16.8500
    • Importers 16.6600-16.6100
    • Exporters 16.7500-16.8500
  • GBPZAR :  Expect a range of 19.6900-19.9500
    • Importers 19.7500-19.6900
    • Exporters 19.8500-19.9500


  • USDZAR 16.7800
  • EURZAR 16.7200
  • GBPZAR 19.8000


  • The Competition Commission raided the offices of some of the big corporates on Thursday, including Sanlam, Discovery and Momentum.
    • Eight of the country’s major life insurers could face a hefty fine following allegations of price fixing and collusion.
    • The insurers are also suspected of colluding to fix trading conditions linked to fees for investment products.
    • If found guilty of fixing prices or trading conditions for their investment products, the insurers could be fined up to 10% of their profits. EWN
  • The SARB’s proactive efforts to contain inflation means the country has a good chance of getting through the worst global inflation shock in a generation “.
    • This according to Deputy SARB governor Fundi Tshazibana.
    • She added, the central bank’s proactive efforts have cushioned the country from bigger hikes during the worst global inflation shock in a generation.
    • She also added that this would be without particularly high inflation or high interest rates”  Moneyweb
  • Fixed income traders are decreasing their expectations for further SA  interest rate hikes after the latest reading on inflation matched economist expectations.
    • July’s CPI figure was the first in three months not to surprise the market to the upside.
    • Traders using this as a reason to unwind bets on the back of easing concerns that the central bank will have to continue with aggressive policy moves.
    • Forward-rate agreements for the year 2023 and 2024 fell on Wednesday after data showed the headline consumer-price index rose 7.8% from a year earlier, compared with 7.4% in June.  Fin24


  • US stock futures lower in Asian markets ahead of Jackson hole this evening.
    • On Thursday markets rallied strongly with the SP500 nearly closing above the 4200 level.
    • In regular trading on Thursday, the Dow rose 0.98%, the S&P 500 gained 1.41% and the tech-heavy Nasdaq Composite jumped 1.67%.
      • Futures contracts tied to the three major indexes were all trading near breakeven.
      • In extended trading, Dell tumbled more than 5% on disappointing earnings, while Affirm plunged 14% on weaker-than-expected revenue guidance for next year.


  • The US 10-year yield declined to 3.05%, retreating from the near two-month high of 3.1% hit on August 24.
  • Fed policymakers noted the need to move borrowing costs to a restrictive territory, highlighting the necessity to bring inflation substantially down.
  • This view all but erasing previous bets of a dovish pivot following slower inflation in July.
  • Still, more recent data provided a little more room for the central bank to maintain its hawkish stance.


  • The Dow added 322 to 33,291
  • The SP500 58 to 4,199
  • The Nasdaq  gained 207 to 12,639

Futures Trading:

  • image : Trading economics


  • Asian markets followed New York higher with positive returns across the region. Traders remain nervous ahead of this afternoon’s, much anticipated Jackson Hole conference.
    • In Japan, the Nikkei 225 rose 0.57% to  28,64, rising from two-week lows after tracking overnight gains on Wall Street.
      • Investors waiting for Jerome Powell’s speech at the Jackson Hole symposium later today.
      • Investors also assessed rising inflation in the Japanese capital city of Tokyo, signalling further acceleration in nationwide consumer prices in the coming months.
      • Still, the Bank of Japan is expected to keep monetary settings ultra-loose to support a fragile economic recovery.
    • In Australia, the ASX 200 climbed 0.79% to close at 7,104. The ASX rising for the 3rd straight session in a broad-based rally, supported by strong corporate earnings and firmer commodity prices.
      • Meanwhile, gold stocks declined on weaker bullion prices, with the benchmark index finished the week 0.15% lower, snapping a five-week advance. Reuters
  • Brent crude futures rose above $100/bl. Prices were set to finish the week higher.
    • Traders citing a tightening supply outlook as potential output cuts by OPEC+ countered expectations of a surge in Iranian oil exports and fears of a global economic slowdown.
    • Earlier this week, Saudi Arabia warned that OPEC+ could cut production to stabilize volatile markets.
    • Investors also digested hawkish remarks from Federal Reserve officials ahead of Fed Chair Jerome Powell’s speech at the Jackson Hole symposium later today.
    • In the US, the benchmark WTI contract also rose above $93.95/bl and were also set to finish the week higher. Gulf Energy news
  • Gold prices declined to $1754/oz as caution dominated sentiment ahead of US Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium.
    • Traders however remain divided on whether the Fed will deliver another supersized 75 basis point or a more modest half-percentage point rate hike in September.
    • Fed president Bostic also commenting that he is 50-50 on deciding between a 75 or 50 bps hike.
    • Gold is set to end the week little changed, though analysts expect further volatility should Powell’s remarks surprise markets. Kitco metals
  • The US dollar steadied around 108.5, as traders braced for Federal Reserve Chair Jerome Powell’s highly-anticipated speech at the Jackson Hole symposium later today.
    • Investors all looking for guidance on the central bank’s tightening plans.
    • Powell is expected to reiterate the central bank’s aggressive stance against surging inflation following a raft of hawkish remarks from Fed officials.
    • This likely supporting the case for further monetary tightening. FX news

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