The ZAR traded in a relatively subdued range vs previous session as markets flipped between Risk On & Off after the BOE QE decision.
- The Rand like most markets looking for direction after the BOE’s surprise QE decision. Risk markets flipping between positive / negative sentiment following Wednesday’s surprise decision.
- The local unit trading in a 20 cent range versus previous sessions of 40-50 cents.
- The Rand unfortunately not gaining as much as expected as the Dollar came under pressure vs the Euro and Pound.
- Hot German inflation data @ 10% YoY, leading to expectations that the ECB will ramp up rate hikes.
- This as Europe largest economy face the prospect of “higher for longer” inflation due to the ongoing energy crises.
- The Euro gaining on the data at the expense of the Greenback with the Dollar Index falling to 112.50 on the back of the data.
- US yields for the 10YT settling at 3.75% after topping 4% earlier in the week.
- The Rand however now benefitting from the Dollar retracement as local power cuts continue to wreak havoc in South Africa.
- Likely to have an effect on SARB rate hikes. NB: any slowdown in the SARB vs G7 rate hike likely to be a negative for the ZAR.
- Weaker SA PPI also showing a slowdown in the economy as Producer inflation printed lower than expected.
Significant Market Data
· 11h00 : EUROZONE INFLATION : 9.6% EXPECTED VS 9.1% PREVIOUS
· 14H00 : SA BALANCE OF TRADE +R20BN EXPECTED AUGUST VS R+24.7BN PREVIOUS
- Risk assets mixed in Asian trading, with US futures higher but Asian equities lower.
- After another volatile week, traders appear uncertain as to the next short term movement in the markets.
- Short term ZAR gains, likely to provide opportunities for importers to BUY Currency to cover short term payment exposures.
- We continue to encourage importers, with short term commitments (1-3months)
- To exact cover and hedge FX payment exposures.
- This morning we opened at 17.9900, which is once again in the middle of yesterday’s range. i.e. 18.1000-17.8100
- And as before this indicates a market, with high levels of uncertainty and we once again expect a range bound session.
- The US Dollar coming under early session pressure and this likely to provide support for the ZAR.
- AS “tired” USD Longs exit positions and book profits ahead of the weekend.
- NB : it is not a trend reversal and these longs are likely to re-enter at lower levels in USDZAR
- Later in the session we have FED governors speaking and it is unlikely they move away from their hawkish stance.
- This will continue to provide support to the US dollar.
- USDZAR : Expect a range 17.8500-18.1400
- Importers 17.9400-17.8500
- Exporters 18.0400-18.1400
- EURZAR : Expect a range of 17.5500-17.7600
- Importers 17.6200-17.5500
- Exporters 17.6900-17.7600
- GBPZAR : Expect a range of 19.7300-20.3300
- Importers 19.9300-19.7300
- Exporters 20.1300-20.3300
- USDZAR 17.9900
- EURZAR 17.6600
- GBPZAR 20.0200
- After lots of pressure from opposition parties, with the country facing its longest continued power cuts,
- Eskom CEO De Ruyter said he is confident power cuts will soon come to an end.
- The SOE has now announced stage four power cuts until Saturday morning, and then stage three power cuts for the rest of the weekend.
- However, De Ruyter gave no specifics. EWN
- In a bid to cover himself, Cyril Ramaphosa said , said the load shedding and power crisis was not a “willful and planned” intention of anyone in government.
- Eskom was a “bed of corruption” and its current challenges happened over years, dissolving current leadership for the poor state of the utility.
- However he admitted that the government has been a huge failure in terms of energy security, as the country faces its worst load shedding to date. EWN
- SA Banks face avalanche of demand from customers trying to ditch Eskom.
- Faced with unprecedented demand for solar systems, banks are partnering with professional firms and offering a variety of financing solutions.
- With various financing options, the major banks have also partnered with professional solar installers to ensure consistency in standards and quality of work. Moneyweb
- US futures were higher on Friday after the major averages turned back lower in the yesterday’s regular session.
- The moves bringing them on track to end the week and the month lower as the bear market decline continues.
- Futures contracts tied to the three major indexes shifted between small gains and losses.
- In regular trading on Thursday, the Dow fell 1.54%, the S&P 500 tumbled 2.11% and the Nasdaq Composite sank 2.84%,
- All three benchmarks on track to end the week and the month at least 1% and 7% lower, respectively.
- The moves came as investors feared that a hawkish Federal Reserve could tilt the US economy into a recession and hurt company earnings
- The US 10-year yield consolidated above 3.8% after briefly topping the 4% mark earlier this week.
- It was level not seen since April 2010, as investors brace for further aggressive monetary policy tightening by the Federal Reserve while big swings in the gilts market rattled sentiment.
- Several hawkish Fed speeches this week confirmed the central bank’s commitment to bring inflation back to its 2% target even at the risk of a recession.
- The terminal rate, the peak spot where the federal funds rate is, is now seen at 4.6%, with policymakers anticipating cutting interest rates in 2024 and extending that into 2025.
- Still, it was a short-lived relief as the British Treasury needed to reveal a plausible plan to get debt under control to restore market confidence.
- The Dow declined 458 to 29,225
- The SP500 fell 78 to 3,640
- The Nasdaq fell 314 to 10,737
Asian markets trading lower on the back of another drop on Wall street.
- In Japan, the Nikkei 225 fell 1.83% to 25,937, closing at its lowest levels in about three months and taking cues from a negative lead on Wall Street.
- Traders citing persistent concerns about surging inflation, rising interest rates and a highly uncertain global economic outlook weighed on sentiment.
- Those moves came despite better-than-expected Japanese economic numbers, with the unemployment rate ticking down, while industrial output and retail sales figures exceeded forecasts.
- Nearly all sectors in Japan declined on Friday.
- In Australia, the ASX 200 dropped 1.23% to close at 6,474, heading back to its lowest levels in over three months and tracking overnight losses on Wall Street.
- Renewed selling in global markets dampened local sentiment as investors continued to grapple with surging inflation and mounting recession risks.
- Nearly all other sectors declined, including financial, consumer and clean energy-related names. Reuters
- The US dollar declined below 112 on Friday, after retreating from a 20-year high of 114.778 hit earlier this week.
- The Buck however is still headed for another strong monthly gain on expectations that the FED will tighten monetary settings further to bring down high inflation.
- The index is up about 3% so far this month and is trading nearly 7% higher for the quarter.
- Fed policymakers reiterated this week that the central bank needs to raise interest rates to restrictive levels amid persistent inflationary pressures.
- The greenback also benefited from increased haven demand given the US economy’s strength relative to other developed nations.
- Crude oil consolidated around $81/bl and were set to decline for the fourth straight month.
- Oil markets have been selling off since June on tightening monetary conditions that sparked concerns over a global recession and weaker energy demand.
- In addition a rampant Dollar added to the bearish sentiment.
- The US oil benchmark is also on track to post its first quarterly loss since the first quarter of 2020, being down about 23% so far since the end of June.
- Meanwhile, investors are looking ahead to an OPEC+ meeting on Oct. 5 as weaker oil prices gave rise to speculations that the cartel could announce another supply cut.
- Markets are also monitoring an escalating energy conflict between the EU and Russia as an EU ban on Russian oil is set to take effect on Dec. 5. Gulf Energy news
- Gold flatlined around the $1660/oz level but were still set to drop for the 6th straight month.
- The drop on the back of a strong Dollar and rising Treasury yields.
- The spike in yields on the back of expectations that the FED will push ahead with its aggressive plan to quell surging inflation.
- The metal is down nearly 3% so far this month and is trading about 20% below this year’s high.