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Morning NOTE

31 May 2022


The ZAR consolidated near the strongest end of the range after a return of investor confidence to markets.


  • The RAND reached 15.4400 after the SP500 briefly breached 4200 and Risk assets followed the move.
  • Investor talk gaining momentum that the Fed would be forced to slow down even though inflation remains dangerously high.
  • This morning the local unit opening on the back foot following a spike in oil prices in Europe.
  • In Europe the ECB changed from a “transitory and no-hike” tone to hawkish and neutral rates talk.
  • Today:
    • We have Eurozone inflation at 11h00, with 7.7% YOY expected vs 7.4% previous.
      • Bear in mind the ECB has a policy rate of 0%.
      • With the EU banning most of Russia’s oil imports we now have a Brent crude oil price at $123/bl.
    • In SA  at 11h00, we have the Unemployment rate of 35.3% expected.
  • In SA all news relating to the hike in fuel prices and the effect on the economy, inflation and interest rates.
    • With, Tiger Brands CEO Noel Doyle quoted as saying the food basket of lower-income earners is going to be significantly more expensive.
  • Today : Expect some ZAR consolidation and a wide range.
    • The market awaits SA unemployment and the return of the USA and liquidity.
    • The spike in oil prices causing ZAR traders to take some profits off the table, as stock futures open lower in Europe.
    • Likely to lead to a weaker ZAR at the open with 15.6500 on the cards.
  • Traders also looking ahead to US NON FARMS on Friday and its implications for the FED.
  • USDZAR :  Expect a range 15.3700-15.6600
    • Importers 15.4400-15.3700
    • Exporters 15.5600-15.6600
  • EURZAR :  Expect a range of 16.6100-16.8100
    • Importers 16.6600-16.6100
    • Exporters 16.7200-16.8100
  •  GBPZAR :  Expect a range of 19.3600-19.7400
    • Importers 19.4500-19.3600
    • Exporters 19.6400-19.7400
  • USDZAR 15.48000
  • EURZAR 16.6400
  • GBPZAR 19.5300


  • The Fuel hike about to hit SA motorists the major topic this morning.
    • Government is still looking at its options as the country faces a petrol price crisis with an increase of around R3.80 a litre taking the price to about R25 a litre.
    • The fuel levy was decreased by R1.50 two months ago, but this was only for a limited period.
    • There have been mounting calls for the fuel levy to be scrapped as South Africans battle to make ends meet.
    • With high fuel prices, comes higher inflation and then higher interest rates.
    • South Africans are waiting to see how government will handle what many are calling the fuel price crisis. EWN
  • Eskom announced the suspension of rolling power cuts for now.
    • But warned that an elevated risk of blackouts remains due to the shortage of generation capacity.
    • The power utility on Sunday suspended the rolling power cuts, saying that there had been a marginal improvement in generation capacity.
    • South Africans had been forced to endure power cuts during the evening peak for most of May as Eskom battled to keep the lights on. IOL
  • Anti-parasitic drug Ivermectin is no longer allowed to be prescribed to COVID-19 patients.
    • The South African Health Products Regulatory Authority has terminated the controlled Compassionate Use Access Programme with immediate effect.
      • SAHPRA saying there’s no credible evidence it helps treat COVID-19.
    • However, Geneticist and clinical researcher at UKZN professor Colleen Aldous said the anti-parasitic drug was not a miracle cure.
      • But research she’s studied shows Ivermectin is having a positive impact on COVID-19 treatment.



  • US stock futures were lower on Tuesday in light holiday volume, while investors are looking to build on last week’s rally.
    • The US stock market was closed on Monday for the Memorial Day holiday.
  • The Dow closed 6.2% higher last week, ending an eight-week losing streak.
    • The S&P 500 and Nasdaq also gained 6.5% and 6.8%, respectively, ending positive after seven straight weeks of losses.
    • The consumer discretionary, technology and energy sectors led the advance last week.
      • Notable strong weekly gains from Home Depot (7.4%), Apple (8.8%), Microsoft (8.2%) and Exxon Mobil (6.2%).
  • In London, the FTSE 100 is set to open slightly lower on Tuesday, tracking a general cautious mood among its European peers.
    • The spike in oil prices renewed concerns over the need to raise interest rates faster.
    • Fresh data for European economies due during the morning will provide more clues on the need to speed up tightening, specially by the ECB next week.
  • US 10’S spike in yields to 2.84% as traders digested PCE data.
    • Core PCE price inflation, Fed’s preferred inflation gauge, fell to 4.9% from a year earlier in April, the lowest in 4 months, pointing out that price increases could be slowing.
    • Earlier in the week, the latest FOMC meeting minutes provided some relief regarding the Fed’s forward guidance.
    • Policymakers agreed that 50 basis point rate hikes would be appropriate as inflation risks are skewed to the upside.
    • This is possible while the economy is robust and the labour market is tight.
    • However, last week’s negative GDP print might have changed this outlook. Source :  Department of Treasury.
  • USA markets closed for holiday.
Futures Trading:
  • image : Trading economics
  • Asian markets lower, after Wallstreet drifted lower in futures trading following the USA holiday.
    • In Japan, the Nikkei 225 fell 0.33%, as Japanese shares consolidated recent gains, with investors being cautious about the global economic outlook.
      • The benchmark touched its highest in more than a month, after major Chinese cities eased coronavirus curbs and introduced new stimulus measures to support economic recovery.
      • However, analysts warned that ongoing supply chain disruptions and rising commodity prices were making investors cautious.
      • Following the EU ban of 90% of Russian crude by the end of the year.
  • The Australian, ASX trading mixed to close at 7,211. Tech stocks trading lower, but mining and commodity stocks rallying following renewed concerns about global supply.
    • The Russian oil ban spooking investors but miners reaping rewards. China’s stimulus plans and exports from Australia, allowed for gains in the sectors.
    • Prices led by Fortescue Metals (1.3%), Rio Tinto (0.6%), South32 (2.5%).  NB: South 32 is a dual listing on the JSE.  Source : TE
  • Brent Crude oil prices jumped to $123/bl after EU leaders reached an agreement late Monday to ban 90% of Russian crude by the end of the year.
    • The embargo is part of the European Union’s sixth sanctions package on Russia since it invaded Ukraine.
    • Prices hitting its highest since March 9, after EU leaders reached an agreement to ban 90% of Russian crude by the end of 2022.
      • The move fuelling concerns of an even tighter global oil supply market.
    • The agreement resolves a deadlock with Hungary over the bloc’s toughest sanction yet.
    • This includes cutting Russia’s biggest bank from the SWIFT messaging system. Source : Energy News
  • Gold fell toward $1,850/oz after a rebound in the dollar and firmer US Treasury yields.
    • Bullion is also on track to end May more than 2% lower, facing pressure in the first half of the month from expectations of aggressive Federal Reserve interest rate hikes.
    • Gold fell past $1,900 an ounce at the start of May to around $1,786 as the dollar surged to two-decade highs.
    • The yellow metal has since recovered some of its losses.
    • The precious metal found recent support from heightened risks of a global recession.
    • And investor expectations that the US central bank may slow or even pause its tightening cycle later this year. Source : Kitco Metals
  • US Dollars recovered to trade at 101.5, but was still set to end the month lower as investors repositioned for the possibility of a slower pace of US interest rate hikes.
    • US consumer spending also rose more than expected in April which shows that the economy remains robust despite price pressures.
    • Investors have scaled back forward expectations about Fed rate hikes amid hints the central bank might slow or even pause its tightening cycle later this year.
    • This after the FOMC increased rates over the previous 2 meetings. Source: FX news
  • Cable or the British pound rallied to above $1.2600, reaching to its highest level in 1 month.
    • On optimism that the new Cost of Living Support package will help boost consumer spending.
    • Chancellor Rishi Sunak announced a new £15 billion support package, targeted toward millions of low-income households.
    • It brings the total cost of living support to £37 billion this year.
    • The package includes a new temporary Energy Profits Levy on oil and gas firms.
    • Britons have been struggling with inflation at 40-year highs and the latest data pointed to recession risk, giving less room for the BoE to hike rates more. Source : Poundsterlinglive.


  • The EU secures compromise on Russian oil ban, with Hungary and in turn shuts down 90% of Russian oil imports.
    • In addition, the EU announced Russia’s largest bank would be cut off from the SWIFT system.
  • On the War front, the Kremlin claims it now controls a third of key Donbas city, as troops continue their offensive.
  • Turkish President Recep Tayyip Erdogan told Russia’s Vladimir Putin he is ready to meet with officials from Russia, Ukraine, and the United Nations.
    • He would be ready to welcome them in Istanbul to help bring about an end to the war, the Turkish government said.
  • A French journalist was killed by Russian artillery in the Donbas area, a local official said.
    • Also the UK MOD, said it is likely Russia has suffered “devastating losses” among its officers.
  • Fears of a global food crisis mount as Ukraine’s vital grain exports are stuck behind blockaded ports.
COVID-19 SOURCE https://www.worldometers.info/coronavirus/ Cases / Deaths / Recoveries
  • WORLD 532,210,045 / 6,312,017/503,169,391
  • USA 85,730,597 / 1,031,286 / 82,151,831
  • SA 3,954,971 / 101,162 / 3,808,079


  • The WHO said Monday it is too soon to tell whether a recent monkeypox outbreak could lead to a global pandemic.
  • The WHO , noted that there is a “window” of opportunity to curb rising cases.
  • The public health body said there are “still many unknowns” related to the spike in cases in non-endemic countries.
  • It concluded by saying the risks to the general public remain low. CNBC
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