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Morning NOTE

27 July 2022


The ZAR weakened in Tuesday trading, on the back of a weaker EURO and position covering ahead of the FOMC tonight.


  • The Rand weakened from 16.6950 to reach 16.9700 (minus 1.64%), as traders exercised caution ahead of the FED rate decision tonight (20h00 CAT).
    • Although the 75 bps are widely expected, investors remain nervous ahead of the press conference and Fed statement.
    • Any language on the hawkish side, likely to send risk assets lower.
    • Softer data continues to print across the world’s largest economies, increasing  the probability of a global recession.
      • Households citing fears of a recession and concerns over the supply of natural gas as Europe approaches its autumn and winter seasons.
      • Earlier this morning, German consumer confidence fell to a new record low at -30.6% vs -27.7% previously.
    • Also, this morning Australian Q2 inflation set a 21 year high at 6.1% vs 5.1% in Q1. (** the highest since 2001).
    • The market expected 6.2%.
  • Traders remain in a cautious i.e. Risk off mode, ahead of the FOMC.

On the data calendar;

  • Today

    • 20H30 : FOMC MEDIA STATEMENT ( NB: 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 a weaker opening as the ZAR tracks the Euro ahead of tonight’s FED meeting.
  • The Single currency (the Euro), once again  hammered by markets, due to geo-political tensions.
  • Last week’s ECB rate providing support only for Russia to cut Nordstrom to 20% sending Gas prices through the roof.
  • Fears of gas shortage in Europe’s largest economy (Germany) sending the Euro into a nose-dive (-1.46%)


  • USDZAR :  Expect a range 16.7700-17.0000
    • Importers 16.8400-16.7700
    • Exporters 16.9300-17.0000
  • EURZAR :  Expect a range of 16.9500-17.2800
    • Importers 17.0100-16.9500
    • Exporters 17.1800-17.2800
  • GBPZAR :  Expect a range of 20.1700-20.5300
    • Importers 20.2700-20.1700
    • Exporters 20.1700-20.5300


  • USDZAR 16.8900
  • EURZAR 17.1300
  • GBPZAR 20.3600


  • Telkom is taking President Cyril Ramaphosa to court over the probe he ordered into alleged malfeasance at the telecoms provider.
    • Ramaphosa asked the Special Investigating Unit (SIU) in January to investigate reports of corruption at the semi-state owned company
    • Telkom has now filed papers at the North Gauteng High Court to stop the investigation into its African operations dating back as far as 2006. EWN
  • Eskom will starting buying power from private producers to boost the national grid.
    • This was one of the new energy measures announced by President Cyril Ramaphosa on Monday night as he tries to bring an end to rolling power cuts.
    • As well as setting up a new energy crisis committee, the plan is to bid for more renewable energies,
    • In addition, it was lifting licensing requirements for private power producers and to allow solar-powered homes to sell excess electricity back to Eskom. Moneyweb
  • SA’s major JSE-listed food retailers continues to play their part in trying to shield already compromised consumers from spiking food.
    • Shoprite Group, Pick n Pay and Woolworths, in trading updates released on Tuesday, reported maintaining internal selling price movements below the recorded consumer price index (CPI) food inflation rate.
    • The latest CPI print came in at 8.6% for June. SENS


  • In regular trading on Tuesday, the major stock market averages all declined on the back of mixed corporate results as companies grappled with:
    • recession fears,
    • surging inflation,
    • and supply chain disruptions.
  • Asian trading saw US stock futures rebounded, ahead of the latest Federal Reserve interest rate decision.
    • Contracts on the tech-heavy Nasdaq 100 rallied 1.4%, while Dow and S&P 500 futures gained 0.4% and 0.8%, respectively.
  • Mega tech reported and Alphabet (parent of Google) jumped 4.9% in extended trading as the firm’s revenues remained solid despite a challenging outlook for the online advertising industry
    • Microsoft also gained 4% on a strong sales forecast.
    • Investors now look ahead to more quarterly reports and the Fed’s policy updates.


  • The US Treasury 10-year yield fell below the 2.8% mark.
  • Investors rushed to safe-haven assets on the back of fears of a pending recession due to aggressive tightening worldwide .
    • The US business activity contracted in July for the first time in nearly two years, pressured by a sharp slowdown in the service sector, clouding a market outlook darkened by soaring borrowing costs.
  • The Fed has already raised benchmark short-term borrowing rates by 1.5 % this year, with another 75 bps hike in July regarded as inevitable.
    • The result is a buying a US bonds, widely regarded as safe haven assets.
    • While such an aggressive tightening should be the key to bringing down inflation, investors have grown concerned that it will also tip the world’s largest economy into a recession.


  • The Dow declined 228 to 31,761
  • The SP500 fell 45 to 3,921
  • The Nasdaq  closed lower by 220 to 11,562

Futures Trading:

  • image : Trading economics


  • Asian markets

    • Market mixed as stocks trade higher in the east.
      • After hours earnings from mega tech, surprised sentiment to the upside after both Microsoft and Alphabet reported positive results.
      • In Japan, The Nikkei 225 rose 0.22% to close at 27,716 reversing losses from earlier in the session,
        • It was helped by heavyweight chip-related stocks amid efforts by the Japanese government to support domestic chip production.
        • However, traders remain nervous ahead of the US Federal Reserve policy decision where it is expected to deliver another 75 basis point rate hike to combat inflation.
        • Chip makers leading gains .
      • In Australia, the ASX 200 climbed 0.23% to 6,823, after the latest inflation data came in slightly below expectations.
        • This prompted markets to scale back bets for a bigger 75 basis point rate hike from the RBA next month.
        • Australia’s annual CPI jumped 6.1% in the three months to June, missing a consensus forecast of 6.3%.
        • Investors are also preparing for an expected rate hike from the US Federal Reserve on Wednesday. REUTERS
  • Crude WTI crude prices increased above $95/bl as an industry report pointed to a large drop in US crude inventories.
    • API data released late on Tuesday reportedly showed that US crude stockpiles declined by 4 million barrels last week.
    • It was much higher than the 1 million barrel drop expected by analysts in a Reuters poll.
    • Concerns that reduced gas supplies from Russia to Germany through the Nord Stream 1 pipeline would force a switch to oil also kept upward pressure on prices. ENERGY NEWS
  • Gold Rallied to $1720/oz as investors prepared for the FOMC tonight.
    • Traders will be watching Fed Chair Jerome Powell’s comments after the meeting for clues on the likely path for US monetary policy.
    • Any hawkish surprise could pressure bullion markets further.
    • Meanwhile, fears of a global recession kept gold prices from further losses.
    • In addition we had  the IMF cutting its global growth forecasts as the world’s three largest economies, namely the US, China and the Euro area are stalling. LME NEWS

  • The Dollar rallied to 107.15, as investors prepare for the outcome of the Federal Reserve’s policy meeting.
    • The Fed is expected to raise interest rates by another 75 basis points on Wednesday.
    • However pushing back versus earlier speculations of a larger 100 basis point increase.
      • Markets will be watching Fed Chair Jerome Powell’s comments after the meeting for clues on the likely path for US monetary policy
    • NB: A hawkish surprise could stoke another Dollar rally.
      • Meanwhile, US consumer confidence fell sharply in July, highlighting fears of slowing growth ahead of Q2 estimates of  US GDP due on Thursday. FOREX NEWS
  • Natural Gas

    • US natural gas prices traded above the $9.7/MMBtu, a level not seen since July 2008.
      • Traders citing higher domestic and international demand being the primary driver.
      • This summer, many regions in the United States have experienced extreme heat, with demand for electricity reaching several record highs.
      • Soaring international demand is also adding to the bullish outlook.
      • Russia’s Gazprom said it would reduce flows through the Nord Stream pipeline.
        • The company citing issues with turbines, delivering only 33 million cubic meters daily, roughly 20% of its capacity, forcing European buyers to find replacements. BLOOMBERG

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