The ZAR strengthened sharply on the back of improved risk sentiment ahead of today’s key US CPI report.
- The Rand gained 1.50% vs the US Dollar on the back of improved global risk sentiment ahead of today’s US Inflation report.
- Traders reducing long Dollar bets ( i.e. higher interest rates & inflation) in favour of the “ inflation has peaked” theory and slower rate rises.
- The idea that the Fed will remain on the rate rises path but at smaller intervals, sparking a risk rally that saw the SP500 gain more than 6% in the last 4 sessions.
- Slower economic growth data supporting a view that if will filter through into inflation data as well as INFLATION EXPECTATIONS (what Powell is looking at!).
- The Dollar index now firmly below its recent peak to open at 108.20 ahead of today’s CPI at 14h30.
Significant Market Data
- Tuesday :
- 11H30 : SA MINING PRODUCTION EXPECTED -4% VS -8% PREVIOUS YOY
- 11H30: SA GOLD PRODUCTION -28.2 PREVIOUS VS -28.6% PREVIOUS YOY
- 14h30 : US CPI EXPECTED 8.1% VS PREVIOUS 8.5% YOY
- 14h30 : US CPI CORE EXPECTED 6.1% VS PREVIOUS 5.9% YOY
- A softer print likely to support Risk assets and a stronger ZAR,
- but a Higher inflation print
- … could lead to a sharp reversal as it will be supportive of the FED policy and we can see some more weakness.
- This morning we once again opening STRONGER on the continued improvement of risk sentiment.
- Stocks are well BID across the Asian region, supporting a stronger ZAR (at least until the US DATA RELEASE).
Given the recent volatile nature of economic data release,
- It is advisable for clients with short term commitments, to consider hedging 50% of their exposure before the US CPI report.
- This would ensure some form of Risk management is in place.
- A decision could then be made post the release with the remaining balance.
- USDZAR : Expect a range 16.9800-17.2800
- Importers 17.0300-16.9800
- Exporters 17.1800-17.2800
- EURZAR : Expect a range of 17.1300-17.4700
- Importers 17.2700-17.1300
- Exporters 17.3700-17.4700
- GBPZAR : Expect a range of 19.8700-20.2100
- Importers 19.9300-19.8700
- Exporters 20.1000-20.2100
- USDZAR 17.0800
- EURZAR 17.3300
- GBPZAR 20.0200
- Eskom has announced it will be ramping-up power cuts, with stage 4 set to kick in at 10am on Tuesday morning.
- The power utility said that a sudden outage of three Kendal power station units had forced them to increase the level of rolling power cuts.
- This round of power cuts will run until 5am on Thursday morning.
- The power utility said that it would release more details in due course.
- News have since emerged that 42 of its electricity generation units had tripped over the past week. EWN
- Following the break of the mining dam wall, President Cyril Ramaphosa took to the area on Monday following an accident at a local mine that caused damage to an estimated 100 homes on Sunday.
- He said, the government will provide extensive support to the people of Jagersfontein.
- Details have since emerged that, the Free State government and the Mineral Resources Department allegedly turned a blind eye to warnings of potential danger and instability at the Jagersfontein mine. IOL
- After splitting from ABSA , Barclays Plc announced it is expanding private-banking services in Africa, looking to target the continent’s $2 trillion high-net worth market.
- The British lender has hired nine bankers from Credit Suisse Group AG based in mainly Dubai, London and Zurich after agreeing a deal to handle clients referred by the Swiss rival.
- This will be done through organic growth and the referral agreement we have with Credit Suisse due to a partnership arrangement. Moneyweb
- The yield on SA’s R186 bond, which matures in December 2026, declined 6 basis points (bps) on Monday to close at 8.76%, equalling the level on August 25, the lowest close since August 17.
- On the back of a stronger Rand, SA’s benchmark bond yields fell to multiweek lows.
- Market concern that a possible recession in the US and Europe might further upend a struggling local economy appeared to outweigh fears of accelerating global inflation, which is making central banks increasingly hawkish. Business day
- In trading on Monday, the Dow added 0.71%, the S&P 500 climbed 1.06% and the tech-heavy Nasdaq jumped 1.27%.
- All three major markets rallied for the 4th straight session as speculations for peak inflation sparked a risk rally.
- However some analysts pushed back that recent gains could just be another bear market bounce.
- This morning US stock futures edged higher as investors looked ahead to the August CPI report due for release later in the global day.
- Traders focussing on the number as it will be one of the last pieces of data the Fed will assess before their Sept. 20-21 policy meeting.
- Dow futures rose 0.1%, while S&P 500 and Nasdaq 100 futures each gained about 0.2%.
- The August CPI data is expected to come in at 8.1% YOY , slowing for the second straight month following an 8.5% increase in July.
- The US 10-year yield flat lined around 3.33%, as investors reassessed the outlook for monetary policy as the Fed seeks to rein in soaring inflation by hiking interest rates further even as growth slows.
- While the US economy is slowing and some industries such as housing show signs of weakness, the labour market has remained robust and quieted fears of a recession.
- Markets have upped their bets and 75 basis-point interest rate hike in September looks like a certainty.
- The German 10-year yield held close to 1.7%, not far from an over 8-year high of 1.75% touched in June.
- Reuters reported that ECB officials see a growing risk that they will have to raise their key interest rate to 2% or more despite a likely recession.
- Meanwhile, the central bank sharply raised its inflation projections to an average of 8.1% this year and 5.5% in 2023.
- Earlier, ECB President Lagarde stated that inflation expectations consistently above target warrant extra monitoring.
- The Dow gained 229 to close at 32,381
- The SP500 gained 43 points to close at 4,110
- The Nasdaq gained 154 to close at 12,266
- Asian Markets all higher on the back of a positive close on Wall Street.
- In Japan, the Nikkei 225 rose 0.25% to close at 28,615 after tracking an overnight rally on Wall Street.
- Meanwhile, markets remained cautious ahead of US CPI data that could influence the Federal Reserve’s tightening plans and the trajectory of global growth.
- Investors also assessed data showing Japan’s producer prices increased steadily in August, while business sentiment improved in the third quarter.
- In Australia, the ASX 200 rose 0.65% to close at 7,010 on Tuesday, rising for the 4th straight session and erasing losses from earlier this month.
- Sentiment was also lifted by data showing Australia’s consumer sentiment rose for the first time since November 2021 .
- Meanwhile, investors remained cautious ahead of US inflation data that could influence the Federal Reserve’s tightening plans and the trajectory of global growth. Reuters
- Brent crude oil futures fell toward $93/bl on Tuesday to snap a 3-day winning streak.
- Traders citing caution ahead of US inflation data that could influence the Federal Reserve’s tightening plans and the trajectory of global growth.
- Demand concerns driven by top crude importer China’s anti-virus restrictions and a deepening energy crisis in Europe also added to the bearish view.
- However, Brent prices rallied about 7% in the past three days and rebounded from over seven-month lows
- A weaker dollar highly supportive as investors await OPEC’s monthly report on its near-term market outlook due for release later on Tuesday. Gulf energy news
- Gold prices steady at $1,720/oz after being rejected around the $1,735 level in the previous session.
- Traders waiting for the US inflation report, the last ahead of the Federal Reserve’s Sept. 20-21 policy meeting.
- The headline inflation rate in the US is expected to slow on an annual basis from 8.5% in July to 8.1% in August.
- Speculations that inflation has already peaked supported gold prices in recent sessions as it also raises expectations for less aggressive Fed hikes after the September meeting. Kitco metals
- The US dollar steadied around 108.2 in subdued trade on Tuesday, as investors prepared for US CPI.
- The report to shed more light on how aggressive the Federal Reserve will need to be in raising interest rates moving forward.
- The headline inflation rate in the US is expected to slow on an annual basis from 8.5% in July to 8.1% in August, and a surprise on either side would likely drive further currency volatility.
- However, the US dollar lost nearly 2% in the past four sessions amid speculations that inflation has already peaked, sparking a rally in risk assets while pressuring the greenback.
- Hawkish remarks from European Central Bank officials saying that rates would need to increase further if high inflation persists also weighed on the dollar. FX news