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Morning NOTE

29 June 2022


The ZAR weakened after ESKOM announced Stage 6 after the Wage strike left the SOE in disarray.


  • The Rand gave back its hard fought gains to weaken above 16/$ following the Eskom stage 6 load shedding implementation.
    • In a blow to the economy still trying to recover from Covid-19, rising fuel costs and rising interest rates the ZAR succumbed to selling pressure.
  • Added to negative sentiment was a sell-off in New York with stocks all trading lower, as new comments from Federal Reserve officials spooked investors.
    • And brought back concerns of an aggressive 75 bps rate hike in July.
    • The comments resulting in the stalling of the Risk Rally.
    • The 10YT yield back at 3.20%
  • The ZAR continues to remain vulnerable to the Risk trade, but the SARB and its proactive monetary policy have so far avoided an aggressive sell-off.
  • Markets have for long turned a blind eye to ESKOM.
    • But after yesterday, the question is – how long can the unit survive the ESKOM debacle?

On the data front

  • Today :
    • 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.
  • Thursday :

    • 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

What to expect today :

  • Yesterday, the ZAR retreated after ESKOM + the profit talking session on Wall street  that turned into a sell-off.
  • And just like that …
    • The ZAR now on the defensive with he unit trading above the R16/$ handle.
    • This morning we opening weaker as stocks lower in Asia, and 16.1800 once again a possibility.
    • NB: With Risk rally fading, look for a weaker ZAR .
    • NB: FED policy will ultimately dictate the direction of the unit due to capital flows.
    • Today’s GDP data out of the States will give an indication and a weaker than expected print will likely support the ZAR.
  • USDZAR :  Expect a range 15.9400-16.1800
    • Importers 16.0100-15.9400
    • Exporters 16.1200-16.1800
  • EURZAR :  Expect a range of 16.7200-17.1700
    • Importers 16.8300-16.7200
    • Exporters 16.9600-17.1700
  • GBPZAR :  Expect a range of 19.40000-19.7000
    • Importers 19.5000-19.4000
    • Exporters 19.6400-19.7000


  • USDZAR 16.0800
  • EURZAR 16.9200
  • GBPZAR 19.6000


  • SA was plunged into darkness when ESKOM implemented Stage 6 loadshedding.
    • In addition, Business Unity South Africa (BUSA) sounded the alarm bells after Eskom stage 6 was implemented on Tuesday afternoon.
    • The business lobby group said the severe outages will negatively impact an already ailing economy. NEWS24
  • After Pravin Gordhan announced that the wage strike had been settled, unions NUM and NUMSA hit back and demanded he retract his comments.
    • Eskom staff members affiliated with the unions have been staging an unlawful protest at the power utility since last week.
    • This has resulted in the country experiencing stage 6 power cuts – said Eskom. EWN
  • The SA government defended its plan to end special permits, that allowed more than 178,000 Zimbabweans to live and work in the country.
    • The so-called Zimbabwe Exemption Permits, first granted in 2009.
      • Clayson Monyela, head of SA’s public diplomacy, said “they were never meant to be permanent”.
        • They are scheduled to expire in December.  
      • The department said only a small percentage of them have applied to regularize their stay. Moneyweb
  • SA recorded foreign direct investment (FDI) inflows of R27.2 billion ($1.7 billion) in the first quarter of 2022.
    • The amount was up from R22.7 billion in the Q4 quarter of 2021, the SARB said on Tuesday.
    • The SARB’s Quarterly Bulletin, said the increase was due to foreign entities increasing equity investments and granting loans to domestic subsidiaries. SARB



  • Wall Street remained under heavy selling pressure on Tuesday afternoon, giving up initial gains.
    • New comments from Federal Reserve officials brought back concerns of an aggressive 75 bps rate hike in July.
    • The NASDAQ, pressured by higher Treasury yields, led losses with a 2.3% drop, followed by the S&P 500, down 1.6%, and the Dow shed 1.3%.
  • Both the San Francisco Fed and the New York Fed Presidents have come in support of an aggressive rate hike at the FOMC’s July meeting.
    • They argued that decisive action on inflation was required to avoid further pain in consumers’ wallets.
    • On the economic data front, US consumer confidence fell to a 16-month low in June amid persistent inflation concerns.


  • The yield on the US Treasury 10-year note steadied above 3.2%, up 14 basis points as investors assessed the outlook for monetary policy ahead of the US PCE reading for May due later this week.
    • The New York Fed reiterated the need to act aggressively to bring down inflation by raising the funds rate up to 3.5% by the end of the year
    • Now, investors will be looking to the Federal Reserve’s preferred measure of inflation, which could provide further cues on its policy tightening path. Source US treasury


  • The Dow fell 491 to 30,946
  • The SP500 fell 78 to 3,821
  • The Nasdaq  declined 343 to 11,181

Futures Trading:

  • image : Trading economics


  • Asian markets all lower following the sharp sell-off in NEW YORK.
    • In Japan, the Nikkei 225 Index fell 1.1% to around 26,760, retreating from two-week highs, with chip-related stocks leading the decline.
      • Japanese shares also tracked overnight losses on Wall Street, as a drop in June US consumer confidence dampened investor sentiment and highlighted the looming risk of a recession.
      • Losses in the technology sector leading the way.
    • In Australia, the ASX 200 Index fell 1.3% to 6,676, retreating from a two-week high and tracking overnight losses on Wall Street.
      • Gold stocks led the declines due to weak bullion prices, with sharp losses from Newcrest Mining (-4%).
  • Brent Crude oil remained above $110/bl after rallying more than 7% in the past three days.
    • Industry data showed US crude inventories declined more than anticipated last week.
      • The American Petroleum Institute reported a large draw of 3.799 million barrels, way worse than market expectations for a 110,000 barrel drop.
    • The UK oil benchmark also jumped 2.5% in the previous session following reports that major producers Saudi Arabia and UAE are at, or very close to, near-term capacity limits.
    • This comes ahead of an OPEC+ meeting this week, where the group is expected to stick to its policy of modest output increases. Energy news
  • Gold declined to $1,820/oz, the lowest in two weeks pressured by US Treasury yields that remain at elevated levels.
    • Gold is currently trading in correction territory, and the yellow metal is 12% off its March peak.
    • Price pressured due to major central banks who continue to aggressively raise interest rates to target runaway inflation, even at the risk of an economic recession.
    • The jump in US yield stalling the bullion rally. Kitco metals
  • The US dollar regained ground around the 104.60, up from its daily lows of 103.70 following hawkish remarks from the New York Federal Reserve, .
    • NY Fed chief Williams said that the US central bank must act aggressively to rein on the highest inflation since 1981.
    • To do this it has to bring rates to between 3% and 3.5% by the end of this year.
    • He pointed out that the world’s largest economy remains resilient and can endure such tightening.
    • The most pronounced buying activity was against the Euro as ECB President Christine Lagarde offered no new information about the central bank’s policy outlook. FX news

COVID-19 SOURCE https://www.worldometers.info/coronavirus/

Cases / Deaths / Recoveries

WORLD 550,643,002 / 6,353,680 / 526,284,419
USA 89,030,727 / 1,041,354 / 84,708,599
SA 3,993,004 / 101,745 / 3,879,002

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