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Morning NOTE

27 June 2022


The ZAR strengthened on the back of a strong Risk asset rally on Wall Street on Friday.


  • The Rand managed to trade below 15.8000 following a strong risk rally on Wall street.
    • Traders in the camp that the FED might have gone too far, too fast as economic data points to a realistic chance of a global recession.
      • With inflation at multi-decade highs the FED has doubled down on their stance that inflation needs to be at 2%.
      • Data however, suggests of rapidly declining economic activity, and that it has the potential to “sway” the FED.
    • The US 10YR indicating this as traders buy safe have assets driving the yield towards 3% at the expense of the Dollar.
    • For now, the market ignoring the ESKOM crises, as SA remains on level 4.
      • However, the lifting of mask restrictions has been pointed as potential to increase economic activity.
This  week on the data front: Monday:
  • 14h30 : US durable goods f/cast is for -0.3% % vs +0.4% MoM
  • 14h30 : US GDP growth QoQ -1.5% expected vs +6.9% previous
  • 15h00 :  ECB’s Lagarde and FED’s Powell once again on the speakers circuit .
    • NB  This will likely add to volatility.
  • 11h30 : SA PPI with 14.7% expected Yoy vs 13.7% previous
  • 14h00 :  SA trade balance for MAY, f/cast is +R12bn vs +R15.49bn previous.
  • Today:
    • Following the strong risk rally that continues in Asian  trading, expect some more ZAR gains.
    • NB: Early on expect some import profit taking, with rotation back up to 15.8700 – 15.9200
    • Thereafter more ZAR gains
      • The market likely to target 15.7000 – 15.6500 later in the session.
  • NB: We also have SARB risk with high PPI data expected later in the week.
  • With Risk rallying, it is highly unlikely that the ZAR will weaken significantly and we are now firmly below the 16 pivot.
  • USDZAR : Expect a range 15.6900 – 15.9200
    • Importers 15.7600 – 15.6900
    • Exporters 15.8500 – 15.9200
  • EURZAR : Expect a range of 16.5800 – 16.8400
    • Importers 16.6700 – 16.5800
    • Exporters 16.7400 – 16.8400
  • GBPZAR : Expect a range of 19.3100 – 19.5100
    • Importers 19.3800-19.3100
    • Exporters 19.4600-19.5100
  • USDZAR 15.8300
  • EURZAR 16.7200
  • GBPZAR 19.4200


  • BRICS : South Africa’s total trade with other BRICS countries has seen a 69% rise since last year.
    • President Cyril Ramaphosa emphasised the crucial role of the BRICS partners to help rebuild the country, especially in the wake of the COVID-19 pandemic.
    • Government said South Africa’s trade with other BRICS countries reached just over R700 billion last year, up from R487 billion in 2017. EWN
  • ESKOM : Eskom announced that stage 4 power cuts would continue until Wednesday after workers failed to report for duty at various power stations.
    • South Africans are hoping that Eskom will provide more information on the fragility of the grid this week.
    • This following an unprotected strike that plunged the country into a weekend of darkness.
    • The unlawful strike action continues after a deadlock in wage negotiations between Eskom’s management and unions.
  • In a bid to solve the crises, Eskom announced it selected 18 companies to develop renewable energy projects.
    • The power utility will lease parts of its land in Mpumalanga to the bidders for this purpose. Source : Eskom twitter
  • Ninety One, SA’s largest  listed asset manager, with R2.8trillion AUM, said it was ready to swoop on cheaper shares after global rout.
  • Despite consensus of a looing global recession, the manager said, that while it has trimmed the equity holdings in its general equity and balanced portfolios as part of a more defensive stance,
    • … it is already looking to buy quality stocks, which are suddenly looking cheaper thanks to the recent market mayhem. Businessday



  • US stock futures continued its climbed higher on Monday after a major rally and the end of last week.
    • Investors trying to find their footing following this year’s sharp selloff.
    • Last week, the Dow bounced 5.4%, the S&P 500 rallied 6.5% and the Nasdaq surged 7.5%.
      • Mega gainers were Tesla (12.1%), Apple (8.9%), Microsoft (9.4%), Amazon (13.3%) and Nvidia (9.5%).
    • Investors continued to speculate whether stocks have found a bottom or undergoing a bear market rally.
    • Traders all expecting markets to remain volatile amid surging inflation.
  • The 10-year US yield continued its recent decline towards the 3% mark, a level not seen in two weeks.
  • Recessionary fears continued worry investors who climbed into safe-haven assets. Central bank actions of great concern.
  • On Wednesday, Federal Reserve Chair Jerome Powell said that the central bank is fully committed to controlling prices, even at the risk of an economic slowdown.
  • Money markets are now expecting 75-basis points rate increase in July, followed by a 50-basis points rise in September. Source : US treasury
  • The Dow added 823 points to 31,500
  • The SP500 added 116 points to 3,911
  • The Nasdaq  gained 375 points  to 11,607
Futures Trading:
  • image : Trading economics
  • Asia Shares Rise were higher across the region, lifted by the rally on Wall Street on Friday.
    • The Hang Seng +3% and the Shanghai Composite hit a near 4-month peak, boosted by the biggest daily cash injection in near 3 months made by the PBoC.
      • Markets in South Korea, Japan, and Australia all were up over 1%, each.
    • In Japan, the Nikkei 225 gained 1% to around 26,760 and in turn extending last week’s rebound and tracking gains on Wall Street.
      • Investors bargain hunting and assessing if  stocks have found a bottom or undergoing a bear market rally.
      • Markets are also expected to remain volatile going forward as surging inflation, aggressive interest rate hikes and recessionary concerns continued to weigh on sentiment.
    • In China, The People’s Bank of China (PBoC) injected a total CNY 100 billion into the banking system.
      • It was the largest daily injection since March 31, to ease pressure from rising cash demand toward the end of the first half of the year.
      • The PBoC added more cash into the financial system last Friday, because demand usually surges towards the end of the quarter.
      • This is when commercial banks also have to shore up cash positions for an administrative quarterly health check by the central bank. Source : Reuters
  • Crude continued its slide lower.
    • In early week trading, Brent crude fell below $112/bl as the G7 nations discussed a price cap mechanism on Russian oil.
    • Fears of a recession and a fall-off in demand also placing pressure on prices.
    • Oil was also headed for its first monthly decline since November as investors worry over a recession spurred by aggressive interest rate hikes worldwide to combat surging inflation.
    • Elsewhere, the US and Iran will reportedly restart talks over reviving a nuclear deal in the coming days, with the EU acting as a mediator.
    • WTI also trading at $107/bl. Source Energy news
  • Gold rallied to $1835/oz, following reports of a potential ban on Russian Gold imports.
    • With Oil Russia have been able to continue to sell other commodities including Gold to raise revenue.
    •  The USA, along with the UK, Japan and Canada, considered the measure given London’s central role in the gold trade.
    • Traders viewed the move that could potentially have a global reach and negatively impact Moscow’s ability to raise funds.
    • This year (2022), Gold has come under pressure since March, due to Central banks raising rates across the world. Source : Kitco metals
  • The US Dollar traded below 104 with recent declines tracking Treasury yields lower.
    • Yields dropping on safe haven buying due to growing concerns about a possible recession.
    • Fed Chair Jerome Powell said in a testimony to Congress that the central bank is fully committed to bringing prices under control.
    • He said this was a goal even at the risk of an economic downturn.
    • He acknowledged that a recession was “certainly a possibility,” reflecting market concerns that the Fed’s aggressive monetary tightening would hamper growth.
    • Powell also said that the Fed will keep raising interest rates following a 75 basis point increase last week with 2% inflation the objective of  the FOMC. Source : Bloomberg
  • Ukraine- Russia
    • G-7 nations to announce import ban on Russian gold as Moscow sanctions widen.
      • The leaders of the G-7 nations will announce a ban on Russian gold imports for Moscow’s unprovoked invasion of Ukraine, U.S. President Joe Biden confirmed on Sunday morning.
      • The U.K. government on Sunday also confirmed the move to ban Russian gold imports, saying it would apply to newly mined gold and refined gold.
      • However, excluding gold that may have come from Russia but had already been exported.
COVID-19 SOURCE https://www.worldometers.info/coronavirus/ Cases / Deaths / Recoveries
  • WORLD 549,031,174 / 6,350,924 / 524,036,717
  • USA 88,794,286 / 1,040,805 / 84,513,615
  • SA 3,992,036 / 101,731  / 3,887,400** We will continue to add the Covid stats only until 30 June 22, given the government’s decision to remove the face mask requirements.
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