The ZAR consolidated recent gains versus the Dollar to in a narrow range ahead of the US PPI release.
Significant Market Data:
- 15h30: US PPI 8.3% EXPECTED VS 8.5% PREVIOUSLY
- 15H30 US PPI CORE 7.2% EXPECTED VS 8.5% PREVIOUSLY
- 09h00 : UK INFLATION 10.6% YOY EXPECTED VS 10.1% PREVIOUS
- 13H00 : SA RETAIL SALES +1% EXPECTED VS 2% PREVIOUSLY .
- 15H30 : US RETAILS SALES 6.9% YOY EXPECTED VS 8.2% PREVIOUSLY
- 16H15 : US INDUSTRIAL PRODUCTION 5.1% YOY EXPECTED VS +5.3% PREVIOUS
- The ZAR opening stronger on the back of positive Risk session in Asia.
- Bond yields falling and a Dollar under pressure continues to provide support to the local unit.
- An early morning opening with the ZAR testing the previous sessions low at 17.2000.
- Price action Indicating an early morning STOP HUNT ahead of the European open (10h00 CAT).
- Local banks taking advantage and we likely to see a bounce back into the Asian range ( 17.2000-17.3200)
- Before a continuation lower.
- Focus remains on the US PPI later in the day, and a weaker number (lower than expected) likely to drive the ZAR towards the R17/$ level,
- With a firm break targeting R16.8000/$
- Trade : SELL USDZAR ON RALLIES
- USDZAR : Expect a range 17.1500-17.4100
- Importers 17.2000-17.1500
- Exporters 17.3300-17.4100
- EURZAR : Expect a range of 17.7300-17.9400
- Importers 17.8000-17.7300
- Exporters 17.8700-17.9400
- GBPZAR : Expect a range of 20.2300-20.4100
- Importers 20.2900-20.2300
- Exporters 20.3500-20.4100
- USDZAR 17.2500
- EURZAR 17.8200
- GBPZAR 20.3300
- The African National Congress (ANC) said it’s close to finalising plans to adopt the step-aside rule in its constitution.
- The controversial rule used to sanction leaders facing serious criminal charges has often come under fire from some factions within the party.
- Opponents of the rule believe it was unfairly implemented in some cases – with leaders facing fraud, corruption and murder charges.
- This of importance as we await news on the Phala-Phala gate saga.
- SA could possibly kill two birds with one stone after signing loan agreements with France and Germany amounting to €600 million to support the country’s move away from its reliance on coal.
- The signing of the agreements took place at the COP27 climate change conference in Egypt.
- With the financial injection, South Africa can move away from coal-powered stations to cleaner energy while alleviating pressure from South Africa’s hamstrung economy. EWN
ESKOM : LOADSHEDDING STAGE 3 until the end of Tuesday
- US stock futures rose in Asian trade on Tuesday after the major averages ended a choppy session lower.
- Traders continuing to examine the outlook for US rates following weaker than expected inflation data and comments from Fed governor Waller.
- Dow, S&P 500 and Nasdaq 100 futures were all up at least 0.2%.
- In regular trading on Monday, the Dow fell 0.63%, the S&P 500 lost 0.89% and the tech-heavy Nasdaq Composite declined 1.12%, with US stocks snapping a two-day advance.
- Meanwhile, Fed Vice Chair Lael Brainard said the central bank could slow the pace of rate increases.
- Investors now look ahead to US PPI data, more Fed speeches and a slew of retail earnings reports. Reuters
- The yield on the US 10-year yield declined below 3.9%, bouncing off a one-month low of 3.8% touched last week as investors reassessed the outlook for monetary policy.
- Speculation about a dovish pivot increased on the heels of a softer-than-expected US inflation report, with money markets now pricing an 80% chance of a 50 bps hike in December.
- However, Federal Reserve Governor Christopher Waller has thrown some cold water in such expectations after warning that policymakers still have work to do before ending interest-rate hikes.
In the UK,
- The yield on the UK’s 10-year Gilt held around 3.3%, its lowest level since September 20th, as investors await the UK government’s fiscal statement on Thursday.
- British Finance Minister Jeremy Hunt is expected to announce some £60 billion in tax rises and spending cuts.
- This as he tries to fix the country’s public finances and restore its economic credibility. Bloomberg
- The Dow fell 211 to 33,536
- The SP500 fell 35 to 3,957
- The Nasdaq fell 127 to 11,196
- Asian markets higher as investors step in to take advantage from improved risk sentiment.
- In Japan, the Nikkei 225 rose 0.1% to close at 27,990, recouping some losses from the previous session. Traders firmly betting on a slowdown in Fed hikes.
- This after traders look to assess the outlook for US rates following mixed signals from the Federal Reserve.
- The Japanese yen depreciated past 140 per dollar, retreating further from two-month highs.
- GDP data showed that Japan’s economy unexpectedly contracted in the third quarter due to global inflation pressures and a weak currency that pushed up import costs.
- Bank of Japan Governor Haruhiko Kuroda also said this week that the central bank would stick to monetary easing to support the economy,
- The BOJ citing the desire to achieve sustainable inflation accompanied by wage growth.
- In China, the Shanghai Composite rose 1% to above 3,100 while the Shenzhen Component gained 1.5% to 11,280 on Tuesday. Reuters
- The US Dollar traded near 107 on Tuesday, holding gains from the previous session as Federal Reserve officials signalled that US rates could end higher than previously anticipated.
- This after US inflation expectations picked up for the first time in four months.
- Comments from Fed Governor Christopher Waller continues to linger after he acknowledged that the central bank may slow the pace of rate increases in the upcoming meetings,
- but emphasized that markets should focus on the endpoint for rates which is likely still “a ways off” rather than the pace of each move.
- Fed Vice Chair Lael Brainard also backed easing off rate increases, but said that the Fed still has “additional work to do” in bringing down inflation.
- Investors are betting that the central bank would moderate the size of their rate hikes to 50 basis points from December after a series of 75 basis point moves in the past four meetings.
- Markets are also looking ahead to US PPI data and more remarks from other Fed officials later in the day. FX news
- US WTI crude oil fell toward $85 per barrel on Tuesday, extending a sharp decline from the previous session as a weakening demand outlook outweighed signs of tightening supply heading into winter.
- DEMAND CONCERNS:
- Investors also continued to worry about resurgent Covid outbreaks in top crude importer China that made the possibility of an economic reopening more uncertain.
- A buoyant dollar that has been supported by hawkish Federal Reserve remarks.
- However, the supply outlook remained clouded after OPEC+ agreed to reduce output by 2 million barrels a day in November,
- while the European Union will ban Russian oil from December. Gulf energy news
- Gold prices steadied around $1,770/oz as traders reassessed the outlook for US rates following mixed signals from the Federal Reserve.
- While Fed officials acknowledged that the central bank may slow the pace of rate increases in the upcoming meetings, they also said that the Fed still has a lot of work to do in fighting inflation.
- Investors are betting that the Fed would moderate the size of their rate hikes to 50 basis points from December after delivering four straight 75 basis point increases.
- However, gold remained near its highest levels in almost three months, benefiting mainly from recent weakness in the dollar and a slump in cryptocurrencies.
- Bullion has always been considered as a safe-haven asset in times of economic uncertainties, though rising interest rates dent its appeal as the metal pays no interest. Kitco metals report.