The ZAR gained % after the Fed delivered an expected 75 bps rate hike.
- The Rand gained 1.2% to reach 16.6500 as the FED delivered on its rate hike of 75 bps.
- The more important Press conference later confirmed that there were no objections and that the FOMC passed a unanimous vote.
- Powell, when pressed on further hikes, said the scope for larger hikes remain on the table and that future decisions will be based on the economic data.
- This makes today’s GDP data quite important given the presser.
- Powell also maintained his belief that the USA is not in a recession due to a strong labour market.
- Analysts however pointing to an upward tick in weekly unemployment claims as an indication that job growth is slowing down.
- Risk assets rallied strongly with the SP500 trading above 3900.
- The Rand also gaining 1.2% to 16.6500 as the dollar lost ground across the board on the back of falling US yields.
On the data calendar;
- 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
- 14h30 : US WEEKLY JOBLESS CLAIMS +253K EXPECTED VS 251K . CONTINUED CLAIMS EXPECTED AT 1380K
- 14h00 : SA TRADE BALANCE FOR JUNE : +R29.5BN EXPECTED VS +R28.35 PREVIOUS
- This morning, after some early weakness (market rotation clearing out weak stops), we are expecting a stronger ZAR as risk assets trade with relief following the FED rate hike.
- Analysts of the opinion that inflation might have peaked due to incoming weak economic data.
- Today’s US GDP data of importance as it could give us a lead into future FED decision.
- The local unit however benefitting from a Weaker Dollar, “WEAK ZAR SHORTS” had their stops triggered .
- Stocks futures also well bid in Asia indicating a RISK ON SESSION.
- EXPORTERS ADVISED TO SELL ANY DOLLAR GAINS ( ZAR WEAKNESS)
- IMPORTERS COULD ALSO BOOK SOME PROFITS
- WE OPENING AT 16.6600 VS 17.3000 1 WEEK AGO , I.E A ZAR GAIN OF 3.7%
However : AS US RATES REMAINS THE LONG TERM DRIVER OF ASSET PRICES.
- USDZAR : Expect a range 16.5000-16.8600
- Importers 16.6200-16.5000
- Exporters 16.7400-16.8600
- EURZAR : Expect a range of 16.8600-17.1500
- Importers 16.9600-16.8600
- Exporters 17.0600-17.1500
- GBPZAR : Expect a range of 20.0900-20.4100
- Importers 20.2000-20.0900
- Exporters 20.3300-20.4100
- USDZAR 16.6500
- EURZAR 17.0300
- GBPZAR 20.2600
- President Cyril Ramaphosa , sought a series of commitments by labour unions and business, ranging from lower entry-level wages to an agreement to boost investment, as part of a plan to revive the nation’s struggling economy.
- The proposals angered both parties because they contain stipulations they aren’t willing to meet.
- In addition, they want the government to do more to confront immediate problems such as power outages and state corruption. Moneyweb
- South African farmers are expected to harvest 9.8% less maize in the 2021/2022 season compared with the previous season, the government’s Crop Estimates Committee (CEC) said on Wednesday.
- The CEC’s latest summer crop forecast estimates the 2022 harvest at 14.713 million tonnes, down from the 16.315 million tonnes harvested last season. Agribiz
- Metalworkers union Numsa’s national congress – marred by legal action and chaos – has produced new leadership.
- On Wednesday night, delegates at the event – which is viewed by some as taking place in contempt of a court interdict – nominated long-standing general secretary Irvin Jim and others unopposed. EWN
- The FOMC raised its benchmark Fed funds rate by 75 bps and raised the target range to 2.25-2.5% .
- it was the 4th consecutive rate hike and in turn pushed rate to the highest level since 2019.
- Chairman Powell said he could not predict monetary policy range for next year and that next decisions will be data dependent.
- Powell also said the central bank will be looking for moderately restrictive level by the end of the year, meaning a 3% to 3.5% level for the fed funds rate. source: Federal Reserve
- In regular trading on Wednesday, the Dow gained 1.37%, the S&P 500 rallied 2.62% and the tech-heavy Nasdaq surged 4.06%.
- All S&P sectors finished higher, led by communication services, technology and consumer discretionary stocks.
- Investors now await Q2 GDP due later today for clues on the state of the US economy, as well as more earning reports from major tech firms.
- In Asian trading, the Dow and S&P 500 futures each shed about 0.1%, while Nasdaq 100 futures lost 0.3%.
- In after-hours trading, Meta Platforms dropped 4.6% on disappointing quarterly results and forward guidance amid a weakening environment.
- US Treasury yields fell , fell below 2.8% mark. It was a level not seen in two months, after the Federal Reserve hiked the funds rate by 75bps as broadly expected.
- The demand for safe-haven assets persisted as Fed policymakers noted that spending and output have eased, furthering concerns of a sharp economic slowdown following a recent slew of poor economic data.
- Investors now turn to the long-awaited US GDP figure to be released on Thursday, which will give more insight into the state of the world’s largest economy.
- The Dow gained 436 points to 32,197
- The SP500 added 102 to 4,023
- The Nasdaq added 469 to 12,032
- image : Trading economics
- Asian markets higher after the FED delivered on its rate hike of 75 bps.
- In Japan , the Nikkei 225 rose 0.36% to close at 27,815 . the index trading lower of an intra-day high following post Federal Reserve gains from earlier in the session.
- Investors remained cautious about the domestic corporate outlook.
- The FOMC raised rates by 75 basis points in a widely expected move on Wednesday, while Fed Chair Jerome Powell said it will likely become appropriate to slow the pace of increases at some point.
- In Australia the ASX200 rallied 1% to 6,890 after the Fed delivered.
- The index also gaining after Aussie inflation data printed lower than expected prompting markets to scale back the expected 75 bps hike from the RBA.
- Technology stocks tracked a relief rally on Wall Street and Mining and energy stocks also advanced on higher commodity prices, including BHP Group (2.5%).
- Spiked to 98/bl continuing on from a 2.4% rally in the previous session.
- Falling crude inventories the catalyst as inventories dropped by 4.52million barrels.
- Oil prices received an added boost after the US FED raised rates by 75 basis points in a widely expected move on Wednesday.
- In addition, Fed Chair Jerome Powell said it will likely become appropriate to slow the pace of increases at some point.
- Commodity markets have been gripped by fears that aggressive rate hikes could lead to a demand destruction.
- However, persistent supply-side issues and various disruptions kept the global market tight and energy prices elevated.
- Senate Majority Leader Chuck Schumer, and Sen. Joe Manchin, on Wednesday unveiled a long-anticipated reconciliation package for clean energy programmes.
- The deal would see hundreds of billions of dollars invested to combat climate change and advance clean energy programs.
- The legislation, called the “Inflation Reduction Act of 2022,” provides $369 billion for climate and clean energy provisions.
- It will be the most aggressive climate investment ever taken by Congress.
- The package would curb the country’s carbon emissions by roughly 40% by 2030, according to a summary of the deal.
- Gold rallied following a decline in treasury yields after the Fed hiked rates as expected by 75 bps.
- Bullion reaching $1740/oz. The market perceived the comments to be less hawkish and risk assets rallied.
- Gold rebounding after trading on the back foot against a rampant dollar the last few months.
- In addition the WGC, (world golf council) lowered its forecasts for physical gold due to slowing demand in China and India.
- Monetary policy remains a threat to the advancement in Gold prices. Kitco metals .
The US Dollar
- Weakened to 106.5 after the FED delivered on the widely expected 75 bps rate hike.
- The Buck giving back some gains after Powell remained non-committal on the path of future rate hikes.
- He confirmed that the decision would be data dependent and that the committee remains committed to bring inflation down to 2%
- Powell said that it will likely “become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation.”
- The Fed also noted that although the labour market remains strong, other economic indicators have softened.
- Investors now turn their attention to US GDP data due later today to gain more insight into the state of the world’s largest economy.
- Barclays posts profit slump after hit from costly trading error in the U.S.
- The British bank reported a £1.071 billion ($1.30 billion) net profit attributable to shareholders for the second quarter — down 48% from the same period in 2021.
- The British bank announced earlier this year that it had sold $15.2 billion more in U.S. investment products — known as structured notes — than it was permitted to.