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Morning NOTE

30 August 2022


The ZAR consolidated near weaker levels of 16.8500 as traders continue to digest Powell’s comments at the Jackson Hole symposium.


  • The Rand managed to move back from weaker levels to trade at 16.8500 after the large equities sell-off stalled in New York.

  • Investors looking for bargains and in turn arresting the decline.
    • The Dollar also retracing from 20 year highs after yields on the 10 yr note declined to 3.08% from a high of 3.15% two days ago.
    • The ZAR benefitting from this move on the back of a Euro that once again raised its head above parity at 1.0000.
    • The single currency finding support as traders widely anticipate a 75 bps hike from the ECB.
    • This implies the SARB most definitely has room to increase rates to get inflation back below the 6% upper band of its inflation target and this will be ZAR supportive.   
  • On the dovish side, Fed president of Atanta, Raphael Bostic, commented his voting will be determined by incoming data.
  • Thus a lower inflation number could see him vote for 50bps and not the excepted 75bps.

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


    • 12H30 :  Fed president BOSTIC SPEECH ( see comments above)


  • 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

Expected Ranges

  • 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


  • USDZAR 16.8300
  • EURZAR 16.8400
  • GBPZAR 19.7100


  • Phala-Phala

    • 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
  • State capture

    • 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

Futures Trading:

  • 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

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