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Morning NOTE

30 May 2022


The ZAR gained on the back of a strong Risk-on rebound as investors bet the Fed might have gone too far.


  • The Rand strengthened to 15.5200 following a strong RISK-ON rally that started in New York and continued to gain momentum in Asia.
  • Stocks rebounded more than 6% after the rebound following the FED minutes (hawkish) and GDP (dovish).
  • Investors betting the FED to take a more measured approach following the dramatic decline in economic growth.
  • This week we have a heavy calendar with potential market moving data.
    • Tuesday :
      • 11h00 : Eurozone inflation  Expected 7.7% YOY vs 7.4% previous
      • 11h30 : SA unemployment rate Q1 at 35.3%
    • Friday :
      • 14h30 : US Non-farm payrolls +320,000 expected  vs 428,000 previous .
      • 14h30 : US unemployment rate 3.5%
  • Investors will continue to monitor data and any slowdown will be a catalyst for more RISK-ON.
  • Today : Expect some more ZAR gains as the market continues to follow risk on sentiment and the equity rally.
    • Traders will likely ride the risk rally into the week as we have US NON FARMS on Friday.
    • In addition, SA’s PPI at 13% likely to keep the SARB ultra-hawkish given the large fuel price increase this week.
    • Possibly scenario could be a SARB that continues to hike and a FED that is forced to slowdown.
    • This scenario likely to be ZAR supportive.
  • USDZAR :  Expect a range 15.3600-15.6800
    • Importers 15.4600-15.3600
    • Exporters 15.6100-15.6800
  • EURZAR :  Expect a range of 16.6200-16.8500
    • Importers 16.6600-16.6200
    • Exporters 16.7700-16.8500
  • GBPZAR :  Expect a range of 19.6000-19.9200
    • Importers 19.6000-19.5500
    • Exporters 19.7400-19.8500
  • USDZAR 15.5200
  • EURZAR 16.7000
  • GBPZAR 19.6400


  • SA are expecting a massive fuel price hike in June and while measures were supposed to be put in place to limit this, it doesn’t seem like government has anything in place.
    • John Perlman spoke to spokesperson at the Automobile Association Layton Beard about the price hike and what this means for motorists.
    • This rise in fuel price is based on both circumstantial factors, namely the war in Ukraine, and larger structural issues that government needs to address. IOL
  • The ANC  has committed itself to ensuring that there is improvement in the supply of electricity in the country to avoid further rolling power cuts.
    • This follows reports from ESKOM, that its 3 worst performing plants are responsible for nearly half of all breakdowns. Moneyweb.
  • Ramaphosa insisted that BEE and and economic growth remained intertwined.
    • With the 2020 report by the Broad-Based Black Economic Empowerment Commission showing that most economic sectors are falling short of their black women ownership targets.
    • This acquisition by a black and female-owned company of a liquid fuel terminal is a historic development.
    • Last week, A  bulk liquid fuel terminal operated by BP Southern Africa in East London has been sold to Wasaa, an independent petrochemicals company.
    • Wasaa has acquired all the terminal’s moveable assets and a 20 per cent share in berth-to-terminal pipelines. Ewn



  • US stocks ended higher for a 3rd consecutive session on Friday, with the Dow adding nearly 600 points and the S&P 500 and the Nasdaq advancing 2.3% and 3.1% respectively.
    • Consumer spending surpassed expectations in April, suggesting demand remained robust to start Q2 and may support a GDP expansion this year.
  • After, the closely watched core PCE inflation rate eased further
    • Traders betting that the Fed will not embark on more aggressive interest rate hikes that emerged after the release of minutes from the FOMC’s May meeting.
  • On the week, the three main averages gained over 6%, with the Dow and S&P 500 booking their best week since November 2020. US markets will be closed Monday for Memorial Day.
  • US 10 Year Note Bond Yield was 2.74 percent on Friday May 27, according to over-the-counter interbank yield quotes for this government bond maturity.
  • Fed policymakers judged that 50 basis point increases in the target range for the fed funds rate would likely be appropriate at the next couple of meetings.
  • The Fed raised the target for the fed funds rate by half a point to 0.75%-1% during its May 2022 meeting,
    • It was the second consecutive rate hike and the biggest rise in borrowing costs since 2000, aiming to tackle soaring inflation.  source: Federal Reserve
  • The Dow  added 575 to 33,212
  • The SP500 added 100 to 4,158
  • The Nasdaq  gained 390 added 12,131
Futures Trading:
  • image : Trading economics
  • Asian markets rallied strongly following the rally on Wallstreet.
    • In Japan, the Nikkei 225 jumped 2.19% to 27,369, and in turn closing at the highest level in over a month.
      • The rally supported as Japanese technology stocks tracked their US peers higher.
      • Wall Street made a strong comeback last week as strong retail earnings and a slowing inflation report lifted sentiment.
    • In Australia, the ASX 200 jumped 1.45% to 7,287, closing at its highest in over three weeks, lifted by a rally in technology stocks following a strong lead from Wall Street.
      • US stocks rallied last week, getting a reprieve from a painful sell-off, as strong retail earnings and a slowing inflation report lifted sentiment.
        • Gains in the Australian technology sector were led by Xero (4.7%).
      • Mining stocks also advanced on stronger metals prices, including BHP Group (2.8%), Fortescue Metals (1.1%), Pilbara Minerals (2.4%) and South32 (3.2%).
  • Brent crude futures gained 1% to around $120 per barrel on Monday, hitting their highest in nearly three months.
    • The move as traders bet the EU would reach an agreement on banning Russian oil, while major Chinese cities eased coronavirus curbs.
    • Despite failing to agree on an embargo on Russian oil on Sunday, EU governments are expected to continue working on a deal to ban seaborne deliveries of Russian oil.
    • They might however allow deliveries by pipeline, ahead of an EU summit on Monday.
    • Any further ban on Russian oil threatens to exacerbate an already tight crude market amid rising demand for gasoline, diesel and jet fuel ahead of the peak summer demand season in the US and Europe.
    • Also in China Shanghai said Sunday it will lift “unreasonable” curbs on businesses from June 1.
  • Gold increased to trade above $1,860/oz and moving towards its highest level in three weeks.
    • The Yellow metal  benefiting from recent weakness in the dollar.
    • The Greenback falling on the back of signs that the central bank might slow or even pause its tightening cycle later this year.
    • However, minutes of the last FOMC meeting showed that most participants believed that 50 basis point rate hikes would be appropriate at each of the next two meetings in June and July to get on top of inflation.
  • US Dollar continued its decline as treasury yields retreated on the back of a rebound in Risk-assets. The Buck seen as a safe-haven currency in times of turmoil and less so when markets rise.
    • The Greenback falling, as investors reassessed expectations about the Federal Reserve’s monetary tightening plans and as fears of a global recession have somewhat receded.
    • The Fed-preferred core PCE index slowed to 4.9% year-on-year in April from 5.2% in March, a still-elevated level that nonetheless indicated that price pressure could be easing a bit.
COVID-19 SOURCE Cases / Deaths / Recoveries
  • World 531,750,839 / 6,311,029 / 502,670,865
  • USA 85,716,214 / 1,031,273 / 82,108,352
  • SA 3,953,967 / 101,146 / 3,803,725
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