The ZAR consolidated near weaker levels of 16.8500 as traders continue to digest Powell’s comments at the Jackson Hole symposium.
Higher SA rates?
- This morning the SA Reserve Bank reported, private sector credit increased by 7.09 % year-on-year in July 2022.
- This figure was below market expectations of 7.28% and following a 7.53% growth a month earlier.
- However, it did mark the 13th straight month of increase in private sector credit.
- In addition, M3 measure of money supply grew 8.15 % in July, down from a 8.33 % gain in June.
- It was also higher than the market consensus of a 6.59% growth. source: South African Reserve Bank
- Earlier, Fed governor Neel Kashkari made it clear he was happy with the stock market reaction (lower) following Jay Powell’s comments.
- Mohammed El Erian, ex-Pimco chief and lead commentator for Bloomberg inferred in a twitter post that “ The Fed PUT is no more”.
- This follows comments that inflation at 2% remains the target to ensure long term growth for the world’s largest economy.
Significant Market Data
- 11H00 : EU CPI INFLATION 9% EXPECTED VS 8.9% PREVIOUS
- 14H00 : SA TRADE BALANCE +R18BN EXPECTED VS +R24BN PREVIOUS
- 12H30 : Fed president BOSTIC SPEECH ( see comments above)
- 14H30 : US NON FARM PAYROLLS + 285K EXPECTED VS 528K PREVI0US
- 14H30 : US UNEMPLOYMENT RATE 3.5% VS 3.5% PREVIOUS
- Expect a range bound session as the ZAR market likely to track international developments.
- Equity futures trading with a bid bias in Asia likely to be Risk supportive and it is highly unlikely we see an aggressive weakening in the ZAR.
- We expect a stronger ZAR at the opening of the European session due to improved risk appetite.
- However, the FED LOOMS LARGE OVER THE MARKET, and in the medium term expect a weaker ZAR on the back of a ultra-hawkish Fed.
- The likely range 16.7200-16.9900.
- USDZAR a BUY on the dip, with a break through 17.0000 targeting 17.1500
- Importers : 16.8000- 16.7300
- USDZAR : Expect a range 16.7000-16.9500
- Importers 16.7900-16.7000
- Exporters 16.8800-16.9500
- EURZAR : Expect a range of 16.7300-16.9200
- Importers 16.7900-16.7300
- Exporters 16.8800-16.9200
- GBPZAR : Expect a range of 19.5600-19.8300
- Importers 19.6700-19.5600
- Exporters 16.7600-19.8300
| OPENING RATES
- USDZAR 16.8300
- EURZAR 16.8400
- GBPZAR 19.7100
- President Cyril Ramaphosa prepares to face Members of Parliament yet again about the burglary at his Limpopo farm.
- Opposition parties failed to get details from Ramaphosa during his budget vote debate in June.
- Even though the African Transformation Movement has succeeded in starting a Section 89 process against him, it’s not giving up on pressing him for answers.
- He has so far remained silent on details about the theft of foreign exchange at his Phala Phala farm in February 2020, citing due process.
- Political parties have until Thursday to nominate experts to sit on a panel that will consider the veracity of the evidence that could lead to an inquiry. EWN
- The National Prosecuting Authority (NPA)’s Investigating Directorate believes it has a watertight case against corruption accused Brian Molefe and Anoj Singh.
- The pair were arrested on Monday and are among eleven that have appeared in the Palm Ridge Specialised Commercial Crimes Court.
- They face charges of fraud, corruption and the contravention of the Public Finance Management Act linked to a questionable locomotive deal at Transnet in 2012. Moneyweb
- Like Massmart, the JSE is faced with the prospect of another large de-listing.
- Grindrod Shipping, announced it had entered into exclusive talks with London-listed Taylor Maritime Investments.
- The talks for a cash offer for the business, meaning it will delist from JSE if the deal goes ahead. Business day live
- Equity futures all trading higher in early session trading.
- On Monday, the Dow fell 0.57%, the S&P 500 dropped 0.67% and the tech-heavy Nasdaq Composite tumbled 1.02%.
- The move ensuring all three benchmarks closing at one-month lows and sliding toward their 50-day moving averages.
- Investors remain on edge factoring in the Federal Reserve’s determination in bringing down inflation with higher interest rates, even at the risk of some economic pain.
- Futures contracts tied to the three major indexes were all trading in positive territory.
- Investors now await the highly-anticipated monthly jobs report on Friday for an update on the strength of the US labour market.
- The US10YT yield traded lower to 3.08% on the back of some safe-haven buying.
- The Fed ‘s commitment to bringing inflation back down to 2%, most likely to keep yields elevated for longer than expected.
- In Europe, the ECB’s hawkish pivot to a likely chance of 75 bps hike saw German yields also spiking.
- The 10 Year Bund yield rising past 1.5% in the end of August.
- The yield lifted by expectations of higher interest rates as major central banks signalled the need to bring inflation down despite increasing recession concerns.
- ECB policymakers made the case for a 75bps rate hike for the central bank’s next meeting in September, citing the elevated risks of inflation becoming entrenched in expectations. Reuters
- The Dow declined 184 to 32,098
- The SP500 fell 27 to 4,030
- The Nasdaq fell 124 to 12,017
- image : Trading economics
- Asian markets recovering with markets trading higher across the region as traders wait for more data ( slowing inflation ) that could alter the Fed’s policy direction.
- In Japan, the Nikkei 225 gained 1.14% to close at 28,196. The index recovering some losses after a sharp fall in the previous session.
- Traders ignoring, fears about aggressive Federal Reserve monetary tightening at least momentarily.
- Investors also digested data showing Japan’s unemployment rate stood at 2.6% for the third straight month in July, as widely expected.
- Energy firms also gained as oil prices jumped overnight on supply concerns, with sector leader Inpex Corp rallying 4.3%.
- In Australia, the ASX 200 rose 0.47% to close at 6,998 the index also recouping some losses from the previous session.
- It was helped by gains in energy and technology stocks as investors brushed aside hawkish expectations from the US Federal Reserve for now.
- Energy stocks also advanced as oil prices jumped overnight on supply concerns, with sector leaders Woodside Energy and Santos Ltd each rising about 1.5%. Reuters
- Crude oil declined to trade $97/bl. the US WTI contract lower a sharp rally in the previous session.
- Traders weighed a global effort to stamp out inflation against various supply concerns.
- Oil is on track to decline for the third straight month as investors fretted about a global economic slowdown. A recession is widely understood to have damaging repercussions for demand.
- Last week, Saudi Arabia flagged possible OPEC+ production cuts to stabilize volatile markets. The news resulting in a +4% spike in crude prices on Monday.
- The oil cartel will meet on September 5 to decide on production policy. Gulf Energy news
- Gold prices lower ahead of the European open. The Yellow metal remains under pressure following the spike in US yields on the back of a hawkish Fed.
- Bullion however recovered from its lows on Monday to close at $1736.52/oz and this morning the yellow metal trades 0.18% lower.
- Silver is also slightly weaker trading at $18.70/oz. In the rest of the commodities complex, both copper (-0.47%) and spot WTI (-0.05%) are trading lower.
- Prices remaining under pressure from a strong Dollar amid expectations that US interest rates will remain elevated for longer.
- During his speech at the Jackson Hole symposium, Federal Reserve Chair Jerome Powell stressed the need to raise and maintain rates at a restrictive level until inflation falls substantially.
- He added that it may hurt growth and soften the job market. Kitco Metals
- The US dollar declined below 109 on Tuesday after pulling back from a 20-year high of 109.48 reached in the previous session.
- Traders balanced the Fed’s aggressive plan to stamp out inflation against speculations that the European Central Bank is considering a more aggressive move in September.
- Traders now await the monthly jobs report on Friday, where Non-farms could once again create volatility, which could give further clues on the Fed’s next steps.
- The Euro, also recovered to trade above parity vs the Dollar, after ECB policymakers also made the case for a more aggressive response against surging inflation.
- Opening the door for a larger hike , i.e. 75 basis point rate hike in September.
- The Euro, which is the most heavily weighted component of the dollar index,
- The single currency, enjoyed some respite following reports that ECB policymakers are considering a supersized 75 basis point rate hike next month. FX news