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Morning NOTE

30 June 2022


The ZAR weakened on the back of Eskom stage 6 and more Hawkish Fed comments.



  • The Rand weakened to a 5 week low, trading to 16.2900 on the back of on-going power cuts and the risk to the SA economy.As we head into the last trading session of H1, the local unit came under pressure due to the following:
  • Eskom – stage 6
  • Adding to the negative sentiment was a drop in SA consumer confidence that fell to a 30yr low.
  • In the USA, Fed Chair Jerome Powell reiterated Fed’s commitment to do-whatever-it-takes to control high inflation and said the bigger risk is to fail to restore price stability.
    • Powell also noted the US economy is well positioned to withstand tighter monetary policy and that he hopes growth will remain positive
    • He did mention there is a risk it will slow more than needed.
    • He also confirmed the Fed aims to move into restrictive territory fairly quickly.
  • It is highly unlikely the Fed will continue on an aggressive rate hiking path, if the economy nose dives into a recession.
  • NB: This appears to be an over-reaction after they missed the signs of inflation in 2021, calling it transitory and thus failed to act.
  • Data wise we already see the slowdown as, The US economy (GDP) contracted an annualized -1.6% in Q1 2022 on a QoQ basis and was slightly worse than a 1.5% drop in the second estimate.
    • It is the first contraction since the pandemic-induced recession in 2020 as record trade deficits, supply constraints, worker shortages and high inflation weigh.


  • 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.


  • Yesterday, the ZAR retreated further on the back of ESKOM stage 6.
  • Heading into the last trading day of June (H2), the unit lost 5 weeks of gains.
  • However, the contraction in the US economy might provide some respite to the local unit, especially if;
    • SA PPI once again surprises to the upside and will likely force a strong reaction from the SARB (ZAR positive).
    • Also US10YT fell back towards 3.00% following a risk off session on Wallstreet and negative GDP.


  • This morning we opening near the weaker end of the ZAR range with stocks relatively flat in Asian trading.  
  • Any positive news out of ESKOM likely to see a swift return for the local unit.
  • And this will dominate the session.
  • A break of yesterday’s high 16.2900 targets 16.38 (key) before 16.5000.
  • Likewise a break of 16.2000, opens up a swift return back to the figure R16/$.
  • USDZAR :  Expect a range 16.0900 – 16.3850
    • Importers 16.2000 – 16.0900
    • Exporters 16.2900 – 16.3850


  • EURZAR :  Expect a range of 16.8300 – 17.1800
    • Importers 16.9600 – 16.8300
    • Exporters 17.0800 – 17.1800


  • GBPZAR :  Expect a range of 19.4000 – 19.7000
    • Importers 19.6200 – 19.5000
    • Exporters 19.7700 – 19.8400


  • USDZAR 16.2500
  • EURZAR 16.9900
  • GBPZAR 19.7100



  • Opposition parties have called for an emergency parliamentary sitting after the country was plunged into stage 6.
  • The DA directly blaming the ANC, Mantashe and Gordhan, while the ANC deflected back to the striking workers.
  • Mantashe particularly on the defensive citing “the government has gone as far as it could with Renewable bid windows” being approved.


  • STAGE 6 leaves the country at risk of another ratings downgrade, this after a rebound in confidence following the mining boom.
  • The BER reported a 30yr low in  SA consumer confidence.
    • The BER (Bureau of economic research) said the index plunged to -25 in Q2-2022.
    • Analysts citing that it would result in a severe slowdown in consumer spending in the remainder of the year.
    • Citing, rising interest rates, higher  fuel costs, power outages and the cost of the pandemic.



  • The final day of trading for June, sees stock futures flat in Asian trade, with the S&P 500 heading for its worst first half since 1970.
    • This as markets were pressured by economic and geopolitical factors since the start of this year.
    • Futures contracts tied to the three major index traded flat to slightly negative.
  • All three major averages are also on track to post sharp monthly and quarterly losses, with technology stocks hit especially hard.
    • Traders blaming decade high inflation, aggressive rate hikes and risk of recession drove much of the selloff in equity markets in the first half.
    • The WAR in Ukraine also escalating volatility further.
  • The FED hiked rates by 75 basis points at its June meeting to bring down rampant inflation, currently running at a 40-year high, with markets pricing in a similar move in July.


  • The yield on the US 10-year fell below 3.10% amid concerns over a looming recession and that the Fed will tip the economy into a recession.
  • This as it focuses more on inflationary risks.
    • Federal Reserve officials in recent days have reiterated their determination to rein in inflation, setting expectations for a back-to-back 75 basis point rate hike in July.
    • However, economic data continues to paint a bleak picture, including worse-than-expected GDP figures and dire consumer confidence data.
  • Adding to woes were the Fed’s preferred inflation gauge, which is printed at more than double of the inflation target.


  • The Dow added 82 points to 31,029
  • The SP500 fell 2.72 to 3,818
  • The Nasdaq    declined  3.65 to 11,177

Futures Trading:

  • image : Trading economics


  • Asian markets lower, with Japan leading the way in losses down -1.42%.
    • The Nikkei 225 fell to 26,560, extending losses from the previous session, with investors factoring in the escalating risk of a global recession.
    • Investors concerned as major central banks aggressively raise interest rates to combat surging inflation.
    • Data also showed Japan’s industrial production dropped 7.2% in May, much lower than market consensus for a 0.3% fall.
    • Analysts suggesting that it could have been affected by lockdowns in China. Technology stocks led the market lower. Bloomberg


  • Crude oil Brent steady at $115/bl but were headed for the first monthly decline since November.
    • The fears of an economic slowdown driven by central banks’ aggressive action to combat surging inflation weighed on oil markets this month.
    • Analysts also flagged signs of weakening US gasoline demand, with near-record prices likely suppressing consumption.
    • The oil benchmark is still up about 50% this year as the global economic recovery from the pandemic slump coincided with disrupted Russian supply due to the war in Ukraine.
    • Underinvestment, capacity limits by OPEC+ and political unrest also mired major producers and added to supply concerns.  Energy News


  • Gold continued its slide as investors exited the yellow metal due to fears of a Hawkish Fed and more rate hikes.
    • Bullion under performs in this environment despite the decade high levels of inflation .
    • The price edging lower towards $1800/oz currently trading at $1816/oz, despite the ban on Russian Gold by the London Bullion Market Association. Kitco metals


  • The US dollar rose and extended gains of the previous session to cross the 105 level and within striking distance of a two-decade high of 105.79 hit on June 15th.
    • Investors rushed to the safe-haven greenback amid downbeat economic data and hawkish remarks from Federal Reserve officials.
    • Chairman Powell, speaking at an ECB annual event, stressed the importance of preventing a high inflation regime, signalling it would go as far as shifting to a restrictive monetary policy. Fx NEWS


  • Another Crypto hedge fund Three Arrows Capital was plunged into liquidation as market crash takes toll.
  • After setting a high of $69,000, BTC plunged to $20,000, a fall of more than 70% off its highs. CNBC


  • In direct defiance to the West, China continues to snap up Russian coal at steep discounts.
  • Despite lower demand and higher domestic production, China has bought significantly higher amounts of Russian coal since May.
  • “This is because Russia has been offering very steep discounts on prevailing international coal prices” . Reuters


Cases / Deaths / Recoveries

WORLD 551,819,640 / 6,356,292 / 527,282,102
USA 89,2366,449 / 1,042,291 / 84,810,554
SA 3,993,444 / 101,764/ 3,879,941

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