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Morning NOTE

5 August 2022


The ZAR recovered on the back of positive Risk Asset sentiment after a strong performance on Wall Street.



  • The Rand recovered from an early session wobble to reach 16.5800 in overnight trading after some stop-losses were triggered on Dollar longs.

  • The ZAR supported by a strong performance on Wall Street after the SP500 traded above 4100, the highest level for 9 weeks.
    • Traders citing lower treasury yields as the 10YT printed at 2.68% on the back of continued recession fears in the world’s largest economy.
    • The inverted yield curve with US 2 v 10’s now trading at 40bps and continues to price in a contraction.
    • The gap the highest since 2000.
    • Central bankers unwilling to budge from their ultra-hawkish statements to combat inflation, and thus igniting fears of a recession.
  • Traders turning their attention to today’s US jobs report, with NON-FARM PAYROLLS expected at 250k vs 375k previous.
    • The market betting a weaker employment report could possibly alter the FED’s stance.
  • Yesterday, the Bank of England hiked rates by another 50 bps. In addition Governor Andrew Bailey warned of a recession heading deep into 2023.
    • He maintained his disposition that ultra-tightening needs to be maintained to break the back of inflation.
    • CPI continues to print at multi-decade highs.
    • Since the hike the UK GILT yields have drifted lower with the 10Y at 1.89% as traders now focus on today’s NFP.
Significant data this week;
  • Friday :

    • 14h30 : US NON-FARM PAYROLLS  +250K expected vs 372k previous
    • 14h30 : US UNEMPLOYMENT RATE  3.6%  expected vs 3.6% previous
Next week (… and  just when you thought it was safe to get back in the water ).
  • Wednesday
    • 14h30 : US INFLATION YOY JULY 2022  , EXPECTED 8.9%  VS 9.1% PREVIOUS
    • 14h30 : US CORE INFLATION YOY JULY 2022  , EXPECTED 6.1%  VS 5.9% PREVIOUS
  • Thursday


  • Expect some early session weakness as importers take advantage of the a stronger ZAR and market makers look to clean out some stops for weak shorts.
  • All eyes remain on the today’s  NFP, with a surprise in any direction likely to drive the Dollar and in turn the ZAR ‘s direction.
    • A better than expected jobs report ( > 250k ) will likely see a weaker ZAR, as US yields will spike as it confirms the FED’s stance.
    • Likewise, a poorer jobs report ( < 250k) , will see ZAR gains, and a drop in US yields, as markets likely to raise bets of a FED PIVOT
Expected Ranges
  • USDZAR :  Expect a range 16.5300-16.6800
    • Importers 16.5800-16.5300
    • Exporters 16.6500-16.6800
  • EURZAR :  Expect a range of 16.8600-17.1100
    • Importers 16.9800-16.8600
    • Exporters 17.0300-17.1100
  • GBPZAR :  Expect a range of 20.0500-20.3800
    • Importers 20.1300-20.0500
    • Exporters 20.2900-20.3800
  • USDZAR 16.6300
  • EURZAR 17.0100
  • GBPZAR 20.1800


  • With many union leaders saying there is no appetite for a strike in the public service given the losses workers would incur amid the cost of living crisis.
    • Cosatu’s public sector unions met with Acting Public Service and Administration Minister on Thursday night to try and prevent a looming stalemate over wage increases.
    • On Friday morning, unions will officially table workers’ rejection of a 2% wage hike offer by government.
      • Instead, they want at least 4% and would settle at the 3%, which was the rate of salary adjustments for public office bearers, including ministers earlier this year. EWN
  • Eskom announced increased levels of load shedding after news reports that KOEBERG UNIT 2’s startup was delayed again.
    • On the back of the government’s move towards renewables, given the current energy crises, it has emerged that US investors are looking for investment opportunities in SA.
      • US investors with more than $1 trillion (nearly R17 trillion) of assets under management are in South Africa to look for investment opportunities.
    • The visit being facilitated by USAID and Prosper Africa, the US government’s initiative to increase trade and investment between African nations and America.
    • It will coincide with US Secretary of State Antony Blinken’s trip, who arrives in SA on Sunday. NEWS24
  • Minister of Home Affairs Aaron Motsoaledi included 41 specialised healthcare professional codes to the critical skills list.
    • This will see a range of healthcare professionals outside the country prioritised in South Africa’s expatriate migration system.
    • Six categories of specialist nurses were included in the latest critical skills list, including trauma, paediatric, and midwifery nurses.
    •  The move is widely seen as a proactive response to the shortage of healthcare specialists in the South African job market.
    • A shortage of nurses in the healthcare sector has even affected private hospitals.
  • In regular trading on Thursday, the Dow and S&P 500 shed 0.26% and 0.08%, respectively, while the tech-heavy Nasdaq rose 0.41%.
    • The S&P 500 and Nasdaq Composite are on track to post a third straight week of gains, while the Dow is set to snap a two-week advance.
  • This morning in light Asian trading, US stock futures were little changed, as investors looked ahead to the highly anticipated jobs report.
    • It could give fresh insight on the state of the economy and further clues on the Fed rate path.
      • Futures contracts tied to the three major index drifted flat to slightly positive.
  • The jobs report :
    • The US non-farm payrolls number for July due Friday is expected to come in at 250,000, and any surprise on either side could impact expectations on the Fed’s next policy move.
  • The 10-year US yield retreated to the 2.7% level, closing in on its lowest level since April.
    • Hawkish comments from Federal Reserve policymakers shifted investors’ focus to further monetary tightening.
    • The central bank has reassured markets that it remains fully committed to taming inflation (CPI currently at 40 year high’s).
      • The Fed’s campaign to do whatever it takes to bring down inflation to the 2% target brought the gap between 2-year and 10-year Treasury yields to an extreme of almost 40 bps.
    • The gap hasn’t been seen since 2000.
  • The Dow declined 85 points to 32,726
  • The SP500 fell 3.23 points to 4,151
  • The Nasdaq  gained 52 to 12,720
Futures Trading:
  • image : Trading economics
  • Asian markets well bid across the region ahead of today’s non farm payrolls.
    • In Japan, the Nikkei 225 rose 0.87% to close at a 2-month high of 28,176, with both benchmarks finishing the week modestly higher.
      • Traders navigated another volatile week marked by :
        • solid corporate earnings,
        • mixed global economic data,
          • hawkish Federal Reserve commentary
        • and heightened US-China tensions.
      • Meanwhile, investors remained cautious following reports that Chinese missiles landed in Japan’s exclusive economic zone.
  • Crude Oil declined below $90/bl to hit $88/bl as demand concerns continue to weigh on prices.
    • Prices are down 10% this week, hitting the lowest levels in six months on growing concerns that a global economic slowdown has precipitated a demand destruction.
    • Official data showed that US crude inventories expanded significantly last week despite expectations for a decline.
      • In addition, US gasoline demand dropped well below pre-Covid seasonal norms.
    • This week’s slump also came even after Saudi Arabia raised oil prices for Asian buyers to a record.
      • …. and despite OPEC’s decision to raise oil output scantily for September and warning of “severely limited” spare capacity.
  • Gold rallied to $1,790/oz Friday, hovering at its highest levels in a month.
    • Bullion is up about 1.4% so far this week and is on track for a third consecutive weekly rise.
    • The Bank of England delivered its biggest rate hike in 27 years and warned that the UK is set to enter recession in the fourth quarter.
      • Investors are also bracing for a key US jobs report that could provide clues on the Federal Reserve’s tightening path .
    • Meanwhile, markets continued to monitor escalating geopolitical tensions in the Asian region, with China reportedly firing a barrage of ballistic missiles into the waters around Taiwan.
  • The US DOLLAR Declined further on the back of lower treasury yields.
    • The Dollar below 106 at 105.86 after facing increased volatility earlier this week.
    • Traders are preparing for today’s key jobs report that could guide the outlook for US monetary policy.
    • The US non-farm payrolls number for July due on Friday is expected to come in at 250,000, and a surprise on either side could impact expectations on the Federal Reserve’s next policy move.
    • The Dollar started to weaken in mid-July amid speculations that the US central bank may raise interest rates less aggressively in the coming months to avoid a recession.
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