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Morning NOTE

7 June 2022


The ZAR weakened 1.63% following a strong reversal in Risk markets across the world.


  • The Rand weakened from 15.2900 to reach 15.5400 at the open this morning.
    • A spike in US treasury yields with the key 10YT breaching the 3% level ahead of Friday KEY US inflation report sparked the Sell-off.
    • Asset markets across the world reversed gains with stocks in the USA falling across the board in New York.
      • Investors once again nervous ahead of the CPI as comments from various Fed governors firm in their stance that inflation needs to be back inside the 2% target level.
      • Certain governors stating the hikes beyond the widely perceived 3% (neutral) Fed funds rate would be accepted.
  • STAGFLATION – a word being mentioned as economies slowdown while inflation remains stubbornly sticky.
    • In Germany Factory orders dropped this morning as the pressure of high energy prices (The WAR) and general price levels continue to bite.
  • On the data front
    • Tuesday : 11h30 SA GDP a Q1 with 1.7% expected YoY and QoQ expected at 1.2%.
    • Friday : US CPI with 8.3% expected
  • Today : Expect some early ZAR gains as exporters take advantage of elevated levels in the USDZAR exchange rate vs the JHB close on Monday.
    • However, the rise in US RATES once again pushing the Dollar to the front of the queue, this likely to support a negative ZAR heading into Friday’s data print.
    • Minor USDZAR Support at 15.4400-15.4000, likely to be the low of the day, and likely provide opportunities for importers to cover.
    • A break of 15.5800 targets 15.7000
  • USDZAR :  Expect a range 15.2300-15.7000
    • Importers 15.4000-15.2300
    • Exporters 15.5800-15.7000
  • EURZAR :  Expect a range of 16.4100-16.7900
    • Importers 16.5300-16.4100
    • Exporters 16.6800-16.7900
  • GBPZAR :  Expect a range of 19.0900-19.5300
    • Importers 19.2100-19.0900
    • Exporters 19.4100-19.5300
  • USDZAR 15.5300
  • EURZAR 16.5700
  • GBPZAR 19.3300


  • The Competition Commission fined Computicket and Shoprite R11.3-million for preventing smaller firms from entering the ticketing services sector.
    • This is the second time Computicket has been fined.
    • According to the commission, Computicket entered into exclusive agreements with inventory providers like theatres, promoters and other event organisers, from January 2013 to June 2018.
    • The action resulted in it being appointed as the sole provider of outsourced ticketing services. EWN
  • The fall-out of the robbery at Cyril Ramphosa’s farm continues as opposition parties write to SARS and the SARB to investigate.
    • Rumours of $4 million being stolen is in direct contravention of the exchange control act according to the DA, who wrote to both institution.
    • It’s understood that the suspects – who colluded with President Cyril Ramaphosa’s domestic worker in February 2020 – were Namibian and fled to that country after stealing foreign currency amounting to millions of rand.
    • In addition, the EFF has called on Namiban president, Hage Geingob to fully disclose all interactions with SA’s President Cyril Ramaphosa after the arrest of suspects who broke into Ramaphosa’s Phala Phala farm in Limpopo. News24
  • In a first in SA , Discovery Insure has launched its own fire service.
    • The trucks are complete with signature blue, in partnership with Advanced EMS (which owns private fire service Fire Ops SA).
    • The two branded fire engines and some response vehicles will be added to the existing Fire Ops fleet, which numbers around 20 vehicles (not all trucks).
    • The Fire Force service will be available “primarily” to Discovery Insure clients in the greater Johannesburg area.
    • It will be able to assist the city in emergencies. Moneyweb



  • US stock futures declined in Asia, following a sharp pullback on Wallstreet.
    • After a strong “initial” rally in New York, stocks declined sharply after the 10YT sold off to reach a yield of 3.04%.
  • Investors now focussing on the key US inflation report due on Friday to gauge whether US inflation has peaked.
    • NB: A  high inflation reading would likely put an end to speculations that the Federal Reserve will pause its interest rate hikes in September.
    • Futures contracts tied to the three major indexes all traded in negative territory.
  • The yield on the US 10-year government bond rose to above 3%, approaching the 2018-high of 3.15%.
    • The level last seen in May as investors expect the May CPI report on Friday to show inflation is still running hot.
    • Last week’s strong job data added to expectations of tighter policy by the Federal Reserve.
      • On a yearly basis, inflation is seen steady at 8.3% in May, holding slightly below a 41-year high of 8.5% hit in March.
    • Markets are now pricing two 50-basis point interest rate increases in June and July but what could happen after that remains uncertain.
      • Fed Vice Chair Brainard said it is unlikely the central bank will pause its current tightening cycle as the inflation rate remains at a 40-year high. source: U.S. Department of the Treasury
  • The Dow added 16 points to 32,915
  • The SP500 gained 12 points to 4,121
  • The Nasdaq  added 48 to 12,061
Futures Trading:
  • image : Trading economics
  • Asian markets traded slightly higher an ignoring the late Wallstreet decline.
    • In Japan the Nikkei 225, traded up 0.1% to 27,944 amid optimism over Japan’s ongoing economic reopening as it prepares to welcome international tourists.
      • A softer yen and an unwavering commitment to aggressive monetary easing also helped local equities.
      • Earlier, Bank of Japan (BOJ) Governor Kuroda said a weak Yen will benefit pandemic-hit service providers in regional areas as Japan is set to reopen its doors to foreign tourists from Friday.
  • The YEN: The Japanese yen declined  past ¥132 per dollar on Tuesday, falling further into twenty-year lows.
    • Investors citing growing policy divergence and increasing interest rate differential between Japan and the US.
      • BOJ Chief Kuroda said the Bank of Japan will not waver in its aggressive monetary easing to support the economy and ensure more robust wage growth.
    • The comments reinforcing the view that the BOJ will remain an outlier among major central banks that are transitioning to tighter monetary policy to rein in soaring inflation.
      • The BOJ left its key short-term interest rate unchanged at -0.1% while guiding 10-year JGB yields to around 0% in April.
      • The Bank also stating it would buy unlimited amounts of 10-year JGBs to defend an implicit 0.25% yield cap every market day.
    • This contrasted sharply with the HAWKISH US FED, with the benchmark 10-year US yield breaking above 3% ahead of a key inflation report on Friday.  Bloomberg
  • US Crude oil rose above $119 /bl as easing Covid restrictions in China is expected to boost demand for oil in the coming weeks.
    • OPEC+ also failed to convince markets that it could help ease tight global supplies.
    • With increased demand coming from China and Japan and the Hot US driving season, adequate supply remains an issue and in turn driving prices higher.
    • OPEC members however struggling to increase output due to production difficulties and Russia facing sanctions.
    • In Europe, Brent crude futures also rose above $120/bl. Energy News
  • Gold declined sharply to $1,840/oz following a rebound in US yields and a strong dollar as investors brace for US inflation data this week.
    • Traders betting it could strengthen the case for aggressive interest rate hikes by the Federal Reserve.
    • Investors also digested a better-than-expected US jobs report from last week which signalled economic resiliency and supported the Fed’s stance.
    • Slowing the decline in Bullion remains risks to the global economic outlook arising from the war in Ukraine, rising rates, rising prices due to ongoing supply disruptions and high commodity prices. Kitco metals
  • The US dollar rose above 102.5 on Tuesday, attempting to climb for the 3rd straight day, following a spike in US yields.
    • Safe haven buying kicked in as risk appetite receded and as investors braced for US inflation data this week.
    • Investors also digested a better-than-expected US jobs report from last week which signalled economic resiliency and supported the Fed’s assertive stance against inflation.
    • The Fed has raised interest rates by an aggregate of 75 basis points this year, and while it is widely expected to deliver 50 bps rate hikes at its June and July policy meetings.
    • A high inflation reading would bolster expectations of further tightening in the second half of the year.
    • The dollar also benefited from waning investor confidence, with US stocks failing to hold onto gains toward the market close in recent sessions as inflation worries persisted. FX NEWS
COVID-19 SOURCE Cases / Deaths / Recoveries
  • WORLD 536,021,397 / 6,321,719 / 507,172,838
  • USA 86,637,487 / 1,033,830 / 82,671,524
  • SA 3,968,931 / 101,350 / 3,839,858
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