The ZAR weakened aggressively on Friday after the US jobs report surprised the market to the upside with +528k new jobs vs 250k expected.
Significant data this week;
This week we turn our attention to US CPI, with traders and investors alike once again waiting in anticipation.
- The Rand weakened to trade at 16.8800 after the jobs report shocked the market. The local unit reaching 16.5400 in early trading.
- US yields rising across the board, as the possibility of a Fed hike of 75 basis points a strong likelihood at the next FOMC meeting.
- The Dollar gaining across the board as both G7 and EMFX suffered at the hands of the Greenback.
- Traders initially speculating of Ramaphosa’s removal after the ZAR weakened before the data release.
- However it appears if it was once again a data leak, that allowed algos to get ahead, and front run the market.
- This morning, the Dollar still strong, but risk assets pushing back with the SP500 trading at 4150.
- The benchmark index recovering all of the losses incurred on the back of the NFP report as traders bet the US economy can withstand Fed hikes.
- The other theory for the strong jobs report relates to inflation, as households are forced to find additional employment due to the high cost of living.
- Resulting in stronger than expected jobs growth.
- 14h30 : US INFLATION YOY JULY 2022 , EXPECTED 8.7% VS 9.1% PREVIOUS
- 14h30 : US CORE INFLATION YOY JULY 2022 , EXPECTED 6.1% VS 5.9% PREVIOUS
- 11H30 : SA GOLD PRODUCTION FOR JUNE YOY EXPECTED -26.5% VS -28.3% PREVIOUS
- 11H30 : SA MINING PRODUCTION FOR JUNE YOY EXPECTED -5% VS -7.8% PREVIOUS (MOM +1.2% EXPECTED)
- 08H30 : UK GDP GROWTH RATE : EXPECTED +2.8% VS 8.7% PREVIOUS
- 13H00 : SA MANUFACTURING PRODUCTION FOR JUNE YOY -2.9% EXPECTED VS -2.3% PREVIOUS
- After Friday’s jobs report shocked the market and resulted in a weaker ZAR ;
- We open with a market surprisingly subdued, with even a bit of ZAR gains in early trading
- Expect early range trading as the local unit look for direction from EURUSD at the EU open at 09h00 SA time.
- We also expect any moves, of significance, to come from the New York session.
- The ZAR finding support on the back of a powering SP500 (> 4,150) with risk assets bid across the board.
- Locally, most JHB liquidity providers (commercial flows) as well as interbank traders treating today as part of a long weekend.
- We now turn our attention to Wednesday’s US CPI, and after Friday’s Jobs surprise, we advise short-term importers (i.e. those who have invoicing needs this week) to take advantage of USDZAR dips ahead of Wednesday’s CPI report.
- USDZAR : Expect a range 16.6700-16.8600
- Importers 16.7200-16.6700
- Exporters 16.8000-16.8600
- EURZAR : Expect a range of 16.9300-17.1700
- Importers 17.0300-16.9300
- Exporters 17.1000-17.1700
- GBPZAR : Expect a range of 20.1100-20.3800
- Importers 20.1900-20.1100
- Exporters 20.3200-20.3800
- USDZAR 16.7500
- EURZAR 17.0700
- GBPZAR 20.2500
- Parliament will initiate a process that could lead to an impeachment inquiry against President Cyril Ramaphosa.
- This follows repeated attempts by the African Transformation Movement, to get Speaker Nosiviwe Mapisa-Nqakula, to agree to its motion.
- The motion is for Ramaphosa to face Parliament over the Phala Phala farm saga.
- Political parties will have to nominate eminent South Africans to consider evidence to justify an impeachment inquiry. News24
- The City of Cape Town is urging residents to use water sparingly.
- The CoCT said that its dam levels were currently sitting at 75% as a result of lower than predicted rainfall in July.
- The Mayco member for water and sanitation, said that they were hoping that August would bring much-needed rainfall.
- “August is very important for us to watch in terms of the predictions that have been made.
- At this moment, our anticipation is that by the end of the hydrological year, our dams would have been filled to about 90%.”
- The city faced one of its worst ever droughts between 2015 and 2017. EWN
- The Amathole district municipality is the latest to be grappling with a water crisis.
- Financial disputes are believed to be behind the struggles of the Eastern Cape-based municipality.
- Allegations of cadre deployment and a lack of skilled leadership at the Amathole municipality are said to be the reasons behind its problems.
- The Democratic Alliance (DA) in the province said that the suspension of several officials meant that there were no leaders to hold accountable. EWN
- The local travel industry was one of the hardest hit, due to COVID-19 lockdowns around the world.
- But experts said that with restrictions lifted in most countries and more people going on holiday, things were finally starting to turn around.
- Over R2.5 trillion – that’s how much money airlines across the globe lost due to the turbulence of COVID-19.
- Dubai tourism is making a concerted effort as the ministry for tourism announced.
- Announcing Dubai Tourism will be coming to South Africa to visit Cape Town, Johannesburg and Durban.” IOL
- Global stock futures higher Monday as investors digested a surprisingly strong monthly jobs report released late last week.
- Traders turned their focus to a key inflation report this week for more clues on the Federal Reserve’s next policy move.
- Investors confident the world’s largest economy can withstand FED rate hikes after Friday’s payrolls report.
- The major averages ended mixed in regular trading on Friday, with the Dow rising 0.23%, while the S&P 500 and Nasdaq Composite lost 0.16% and 0.50%, respectively.
- The US 10YT yield traded 2.82% after a strong jobs reported confirmed, the Fed will likely hike 75 basis points at the next meeting.
- The US economy added 528K payrolls in July 2022, well above Wall Street expectations.
- The data followed hawkish comments from several Fed officials, which made a policy pivot even more elusive as the central bank sought to cool an overheating economy.
- Investors now await the July CPI data slated for release on Wednesday.
- The Dow added 76 points to 32,803
- The SP500 fell 6 points to 4,145
- The Nasdaq declined 63 to 12,657
- image : Trading economics
- Asian markets trading higher across the region after Friday’s strong jobs report as well as investor optimism around better than expected corporate earnings.
- In Japan, the Nikkei 225 Index rose 0.2% to 28,240, extending gains from last week.
- The move supported by upbeat domestic corporate earnings and a strong outlook.
- However, investors remained cautious following a surprisingly strong US jobs report.
- Traders worried that the report supports the Federal Reserve’s firm hawkish stance, ahead of the release of US inflation data this week.
- In Australia, the ASX 200 Index closed up by 0.07% to 7,021.
- It was the highest level in almost two months, as gains in commodity-linked stocks outweighed losses in other major sectors.
- Leading the index higher, was OZ Minerals gaining more than 35% after it rejected a A$8.34 billion takeover bid from BHP Group which it considered undervalued. Reuters
- Crude oil WTI futures recovered above $89/bl after last week’s 10% collapse.
- Traders citing US jobs and Chinese exports data eased concerns about a demand-sapping global recession.
- A stronger-than-expected US jobs report allayed fears of an economic slowdown in the world’s top oil consumer,
- while solid export growth data in China raised hopes for an economic rebound in the country.
- Demand worries caused the US oil benchmark to fall almost 10% last week.
- Prices collapsing to their lowest levels in six months as data pointed to growing US crude inventories and declining US gasoline demand. Energy News
- Gold declined to $1,770, after falling from one-month highs in the previous session.
- The rise in US yields, after a surprisingly strong US jobs report supported expectations that the Federal Reserve will continue to tighten aggressively.
- Analysts are now betting that the Fed will deliver another 75 basis point rate hike in September.
- Investors are also preparing for US inflation data due on Wednesday that could offer more clues on the central bank’s rate hike path. Kitco metals
- The US dollar rebounded above 106.5, after gaining nearly 1% in the previous session.
- The Greenback supported by a surprisingly strong jobs report last week that reinforced that Federal Reserve’s case for further monetary tightening.
- The US economy unexpectedly added 528,000 jobs in July, more than double the 250,000 jobs economists predicted.
- It also eased recession fears as the jobs market remained solid even in the face of high inflation and rising interest rates.
- Markets are betting that the Fed will deliver another 75 basis point rate hike in September.
- In addition, Fed Governor Michelle Bowman said, she supports the central bank’s 3 quarter point rate hikes and believes they should continue until inflation is subdued.
- Investors now turn their focus to the US CPI report due on Wednesday that could offer more clues on the Fed’s rate hike path. FX news
INFLATION and EM REVIVAL
- Emerging markets hiked interest rates ‘way before’ the Fed, says major asset management firm.
- Rajeev De Mello of GAMA Asset Management says emerging markets “will benefit once we get past this period of frontloading the Fed hikes.”
- He added, if the U.S. Federal Reserve tightens monetary policy even more than what has been priced in, there could be further stress on those markets. CNBC