The ZAR weakened on the back of a stronger than expected US jobs report resulting in global Risk Off.
- The Rand weakened after the US Non-farm payrolls report, surprised to the upside with payrolls printing at 263k vs 250k expected.
- The data supporting the FED ‘s narrative that rates are nowhere near to being “restrictive” and that the FOMC remains committed to bringing inflation under control i.e. back to 2%
- The data sparking a global sell-off in risk assets that included all asset classes i.e. Stocks, Bonds, EMFX as well as Crypto.
- The US10YT reaching 3.88%, the Dollar Index 112.87, while the SP500 also declined to reach 3625.
- The ZAR losing 1.4% to trade at 18.1800, following a Friday start at 17.9600.
- This week we are once again the mercy of the data genie, with lots to digest,
- We also have the all important FOMC FED MINUTES on WEDNESDAY 20H00 , this will once again give insight into the discussions by the FOMC members.
- This is followed by KEY US CPI at 14h30 on Thursday.
Significant Market Data
- 08H00 : UK UNEMPLOYMENT AUG 3.6% VS 3.6% PREVIOYS
- 13h00 : SA MANUFACTURING YOY 2% EXPECTED VS 3.7% PREVIOUS
- 14H30 : US PPI YOY 8.3% EXPECTED VS 8.7% PREVIOUS
- 14H30 : US CORE PPI YOY 7.3% EXPECTED VS 7.3% PREVIOUS
- 15H30: ECB PRESIDENT LAGARDE SPEAKS
- 20H00 : US FOMC MINUTES FROM SEPTEMBER MEETING ***
- 11h30 : SA GOLD PRODUCTION -18% YOY EXPECTED VS -19.7% PREVIOUS
- 11h30 : SA MINING PRODUCTION -8.7% YOY EXPECTED VS -8.4% PREVIOUS
- 14H30 : US CPI YOY 8.1% EXPECTED VS 8.3% PREVIOUS ***
- 14H30 : US CORE PPI YOY 6.5% EXPECTED VS 6.3% PREVIOUS
*** = HIGH RISK
- 14h30 : US RETAIL SALES 8% YOY EXPECTED VS 9.1% PREVIOUS
- After an aggressive sell-off in risk assets driving the USDZAR to 18.1800, we expect some early session profit taking.
- Short term exporters likely to take advantage of elevated levels, resulting in “morning session” ZAR gains.
- A move towards the Asia low of 18.0700, likely to result in Dollar buying, as the Dollar remains on the front foot.
- NB: we opening near the top end of the range, showing a market that maintains direction conviction.
- As US yields continue to rise following Friday’s jobs report it shows the FED will likely continue on its rate path.
- In addition, we have a busy week on the data front and the “line of least resistance” i.e. TREND calls for a weaker ZAR.
- As we head into a busy data week, we encourage clients to exact prudent risk management and hedge at least 50% of their exposures.
- The data will be closely watched and US CPI will be the key driver this week.
- It will affect yields and so determine the next path of the ZAR
- For today though, the trade remains
- BUY USDZAR ON DIPS.
- USDZAR : Expect a range 17.9700-18.2800
- Importers 18.0700-19.9700
- Exporters 18.1800-18.2800
- EURZAR : Expect a range of 17.4900-17.7900
- Importers 17.5900-17.4900
- Exporters 17.6900-17.7900
- GBPZAR : Expect a range of 19.8500-20.3000
- Importers 20.0000-19.8500
- Exporters 20.1500-20.3000
- USDZAR 18.1600
- EURZAR 17.6700
- GBPZAR 20.1300
- South Africa didn’t have a good week.
- We saw the continuation of the worst bout of load shedding since it started in 2008 as well as the taps running dry in many suburbs of Johannesburg.
- This was followed by an illegal strike at Transnet, which brought activities at several ports to a virtual standstill.
- The events will cause further deterioration in already record-low business, consumer and investor confidence, which will also flow to the economy and companies. Money web
- Eskom says load shedding will return from Monday until Wednesday.
- The power utility says Stage 2 power cuts will kick in from 4 pm on Monday to replenish emergency generation reserves and boost generation capacity.
- This follows a short weekend break that saw rolling power cuts suspended from Saturday morning. NEWS24
- Another nationwide march/strike is being organised by COSATU.
- On Friday, Cosatu is expected to embark on a nationwide march on Friday in commemoration of World Day for Decent Work.
- The federation is demanding that government and employers respect labour laws and take seriously the calls for decent work.
- The workers will gather in various cities across the country, with the hopes of having their voices heard. EWN
- Another heatwave can be expected in Gauteng from Wednesday.
- That’s according to early forecasts.
- SA Weather has issued an advisory after Gauteng battled sweltering temperatures last week .
- In addition Johannesburg residents were teased with rumbling skies, but no rain on Friday and Saturday. IOL
- US stock futures extended losses on Monday after stronger-than-expected US NFP data caused another equity selloff during Friday’s session.
- In regular trading on Friday, the Dow dropped 2.11%, the S&P 500 tumbled 2.8% and the Nasdaq Composite slumped 3.8%, with US stocks heading back toward their lowest levels in over two years.
- Those moves came as solid US jobs data and hawkish remarks from US policymakers extinguished hopes for any dovish pivot from the Federal Reserve.
- Investors now look ahead to the monthly CPI report on Thursday amid fears that higher energy prices could fuel inflationary pressures.
- Major US companies are also set to release quarterly earnings this week including JPMorgan, Morgan Stanley, Citibank
- The US 10-year yield rose further toward 3.9%, approaching a 14-year peak of 4% hit on September 27th.
- The jump in yields after the better-than-expected employment report reinforced market bets the FED will maintain its aggressive tightening path to tame inflation.
- Also, Cleveland Fed Bank President Loretta Mester said the Fed has to be “singularly focused on inflation,”, even at the cost of higher unemployment and weaker growth.
- The Dow declined 630 points to 29,296
- The SP500 fell 104 points to 3,639
- The Nasdaq fell 420 to 10,652
- Asian markets all trading lower across the board following Friday’s bloodbath on Wall street after the NFP report.
- In Japan, the Nikkei 225 declined 0.88% to close at 27,116, ending a 4-day advance, as US Federal Reserve officials signalled determination in bringing down inflation.
- The news after US jobs showed another robust month as the world’s largest economy continues to add jobs.
- Traders fearing the report will allow for more rate hikes that markets fear could tip the economy into recession.
- In Australia, the ASX200 fell 1.4% to close at 6,668, ASX 200 Index dropped 1.4% to close at 6,668 on Monday, falling for the second straight session and tracking a sharp selloff on Wall Street.
- After solid US jobs data extinguished hopes for a dovish pivot from the US Federal Reserve.
- Investors are also preparing for US inflation data this week that could guide the US central bank’s monetary decision in November. Reuters
- The US dollar rebounded to trade near 113 on Monday after rising for 3 straight sessions.
- The Buck was supported by stronger-than-expected US jobs data which increased bets that the FED will press ahead with its aggressive monetary tightening plans.
- Last week, a chorus of Fed officials also sounded unequivocally committed to bringing down inflation with more rate hikes, even at the cost of higher unemployment and weaker growth.
- Investors now look ahead to US inflation data on Thursday that is expected to show still elevated price pressures.
- Elsewhere, the dollar remains supported by safe-haven demand amid global recession fears, and heightened geopolitical tensions.
- Crude oil WTI traded at $92/bl.
- Crude remains well bid following last week’s large OPEC+ output cuts.
- For now the Demand problem pushed aside by OPEC+ that threatens to squeeze supply further ahead of winter.
- The US oil benchmark rallied nearly 17% last week after OPEC+ agreed to cut production by 2 million barrels per day or about 2% of global supply from November.
- It would be the biggest output cut since the start of the pandemic.
- Adding to supply concerns, Russia reiterated its warning last week that it won’t sell oil to countries that support the US-led plan to impose a price cap on Russian oil. Gulf energy news
- Gold prices declined below $1,700/oz after robust US jobs data cemented expectations that the US Federal Reserve will continue raising interest rates aggressively to tame surging inflation.
- The US JOBS s report showed that the US economy added 263,000 jobs in September, exceeding expectations for a 250,000 gain.
- In addition, the unemployment rate fell to a historic low of 3.5%.
- New York Fed Bank President John Williams also said on Friday that rates need to rise to around 4.5% over time depending on how the economy performs.
- The dollar and Treasury yields extended their winning streaks after the data release, pressuring gold prices. Kitco metals