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Morning NOTE

4 July 2022


The ZAR recovered to open at 16.3000 after weakening to 16.4900 on the back of ESKOM stage 6.



  • The Rand recovered after talks continued between Eskom and the Unions continued to resolve the labour strike impasse.

  • The local unit recovering in thin Monday trade, due to the US Holiday. (4th of July).
    • The ZAR has not benefitted from the drop in US yields as the ESKOM cloud continues to hang over the country and the local unit.
    • Traders expecting anything positive out of the ESKOM talks to be ZAR supportive, especially after US bond yields fell below 3.00% on the back of fears of a US recession.

    • FED polices appears to be affecting consumers spending as well as overall GDP data out of the world’s largest economy.
      • Investors believing the FED will be forced to change their policy.
      • However, the FED and its board of governors continue to stress their determination to bring inflation back down to 2%.
      • And the only way to achieve this is to reduce monetary stimulus, by hiking interest rates.

On the data front:

  • Wednesday : 20H00 : US FOMC MINUTES.
  • Friday : 14H30 : US NON-FARM PAYROLLS : +270K EXPECTED vs 390k previous
  • Today :

    • Expect a range bound session, due to the US holiday.
    • However, any news out of ESKOM +/- could result in sharp moves in the local unit.
    • The likely hood of positive announcement likely to send the local unit stronger.
      • Also US10YT below 3.00% following a flight to safety likely to support the local unit.
    • This morning we opening in the middle of the previous session’s range.
    • A test of either side likely based on the ESKOM negotiations.
      • A break of 16.3600 targets 16.5000.
      • Likewise a break of 16.2500, opens up a swift return back to the figure R16/$.
  • USDZAR :  Expect a range 16.2200-16.4300
    • Importers 16.2900-16.2200
    • Exporters 16.3600-16.4300 
  • EURZAR :  Expect a range of 16.8900-17.1800
    • Importers 16.9600-16.8900
    • Exporters 17.1300-17.1800
  • GBPZAR :  Expect a range of 19.6400-20.0100
    • Importers 19.7200-19.6400
    • Exporters 19.8200-20.0100


  • USDZAR 16.3300
  • EURZAR 17.0300
  • GBPZAR 19.7700


  • Eskom announced stage 6 will continue this week as it says its system remains vulnerable.
    • The country is currently flipping between stages 4 and 6 which will persist until next Sunday midnight.
    • Eskom said it will take a few weeks for its power generation system to fully recover to pre-strike levels.
    • The SOE blaming the recent unprotected strike by some workers for the rolling blackouts.
    • Unions and the utility are still engaged in wage talks. EWN
  • South Africans are bracing themselves for another fuel price increase this week.
  • Economists have warned that a massive petrol price hike was on the cards.
    • There’s also been speculation that consumers could be paying close to R25 for a litre of 93 octane from Wednesday.
    • The DA said that it believes that the fuel increase will result in a more severe financial and humanitarian crisis in the country.
    • DA MP Kevin Mileham is expected to brief the media on Monday on the party’s fuel price deregulation bill submission to Parliament.
    • It said that the proposal will bring relief to cash-strapped South Africans and get government off the hook as far as the fuel price in concerned. EWN



  • Stocks in New York closed higher in the first session of the Q3, as stocks bounced back from earlier losses amid thin trading volumes ahead of a holiday-extended weekend.
    • In regular trading, the Dow was up 322 points, the S&P 500 rose 1.1%, and the NASDAQ booked a 0.9% gain.
  • Still, all three indexes posted weekly losses, NASDAQ underperformed with a 4.1% loss, the S&P fell 2.2% and the Dow shed 1.3%.
    • Investors remained concerned after dire consumer morale and worse-than-expected GDP figures.
  • Last session, the Dow and the S&P 500 booked their worst 1st half performances since 1962 and 1970, respectively, while the Nasdaq saw its worst-ever half-year run.


  • The yield on the US 10-year fell below the 2.9% mark. It was a level not seen in a month, as investors rushed to safe-haven assets.
    • The move on the back of persistent fears that the Fed’s aggressive policies to tame inflation will eventually tip the US economy into a recession.
    • Weak economic data last week fuelled those concerns further, namely signs of a slowdown in consumer spending and worse-than-expected GDP figures.
    • Data indicating that price increases could be slowing but still near multidecade highs.
  • In the EU, a deteriorating growth outlook and record inflation prompted a similar rush for government debt.
    • It was reflected in Germany’s 10-year Bund yield tumbling below 1.5% for the first time in four weeks. source : US treasury


  • The Dow added 321 to 31,097
  • The SP500 added 39 to 3,825
  • The Nasdaq  gained 99 to 11,127

Futures Trading:

  • image : Trading economics


  • Asian stocks followed Wall Street after stocks in New York staged a comeback.
    • In Japan, the Nikkei 225 rose 0.84% to close at 26,154, halting a three-day decline, with utility companies supporting the rebound.
      • Japan continues to deal with an unprecedented heatwave that threatens power shortages.
      • A fire that caused a shutdown in a 500 megawatt unit at Japan’s biggest power generator, JERA, exacerbated concerns over a prolonged electricity crunch.
    • In Australia, the ASX 200 gained 1.1% to close at 6,613, after sliding for three consecutive sessions.
      • Investors buying up beaten-down shares ahead of an expected interest rate hike from the Australian central bank.
      • The Reserve Bank of Australia is expected to deliver another half-point rate increase on Tuesday to tame surging inflation.
        • Aussie inflation accelerated to a 20-year high of 5.1% in the first quarter and projected to approach 7% by the end of 2022.
  • Crude oil rose above $109 /bl  erasing losses from earlier in the session, as investors weighed persistent supply-side issues against looming risks of a demand-sapping global recession.
    • Monday’s moves followed a 2.5% rally on Friday driven by supply outages in Libya and expected shutdowns in Norway.
    • Oil prices also remain more than more than 40% up this year as the global economic recovery coincided with disrupted Russian supply due to the war in Ukraine.
    • Adding to supply concerns, OPEC+ has been struggling to pump more crude due to underinvestment, capacity limits and political unrest in some member states.
    • Investors are also tracking China’s slow emergence from virus restrictions amid recurring outbreaks throughout the country.  Energy News
  • The US dollar gained above 105, and with the US celebrating independence day, expect thin liquidity conditions.

    • The dollar remains well bid with Fed policymakers confirmed expectations for further policy tightening, indicting another 75 basis point interest rate hike in July.
    • Also, tighter financial conditions across major economies raised fears of a global recession, prompting investors to divest out of riskier assets into the safety of the dollar.
    • Investors now look ahead to the minutes of the last central bank meeting and the monthly jobs report for clues on the likely path for US monetary policy. FX news
  • Gold consolidated above $1,810 /oz after hitting a five-month low of $1,784/oz.
    • Bullion however remains under pressure from a strong dollar and a broader decline in commodity prices
    • The dollar hovered near its highest level in two decades as the Federal Reserve led a global wave of aggressive interest rate hikes to combat rising prices.
    • Meanwhile, tighter financial conditions across major economies raised fears of a global recession, prompting a broad decline in commodity prices.
    • The CRB Index reflected such economic fears, and is down more than 10% from its 2022 high. Kitco metal


  • The west continues to find and explore different ways of sanctioning the Russian government and economy because of the WAR with the Ukraine.
    • U.S. President Joe Biden presented the idea of an oil price cap to the rest of the G-7 leaders and his counterparts agreed to look at how to do it.
    • Energy analysts have questioned exactly how the G-7 can impose a price ceiling for Russian oil.
    • Most warning that the plan could backfire if key consumers are not involved, and time may be running out to make it workable.
    • Russia’s Deputy Prime Minister Alexander Novak said Wednesday the idea could push oil prices even higher. CNBC

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