The ZAR lost some ground after traders booked profits on risk assets, with stocks and EMFX retreating.
- The Rand weakened to 17.9000 after reaching a session high 17.5800. Traders acutely aware of the pending NFP on Friday.
- US DATA also surprising to the upside with private payrolls beating market expectations, and once again showing a strong labour market.
- This unlikely to convince a change in FED path as was confirmed by SF Fed president Mary Daly, who said markets are assuming
- Incorrectly for a FED pivot in 2023, and that rates are not yet in restrictive mode.
- The comments sending Bonds yields higher again as well as the Dollar.
- The Dollar index breaking through 112 before falling back .
- This morning, Asian markets seeing US futures higher with the SP500 above 3800, indicating a market looking to assume more risk.
- This likely to be supportive of the ZAR.
- Eskom crises as well as water restrictions continue to trouble South Africans but having little effect on the ZAR as the Fed remains the only game in town.
Yesterday stronger US DATA
- ADP -Private businesses in the US created 208K jobs in September of 2022 compared to an upwardly revised 185K in August.
- Figures came slightly above market forecasts of 200K.
- The ISM Services PMI came in at 56.7 in September of 2022, also beating market forecasts of 56, and still pointing to the growth above the historical average of 55. CNBC
- US Mortgage Rates Hit 16-Year High of 6.75%, the highest since July 2006 and compared to 6.52% in the previous week.
Significant Market Data
- 14H30 : US NON FARM PAYROLLS +250K EXPECTED VS 315K PREVIOUS
- 14H30 : US UNEMPLOYMENT RATE 3.7%
- The ZAR retreated but remaining well bid in early trading following a risk rally in Asian trading.
- The benchmark sp500 breaking through the 3800 level.
- Yesterday, The stronger than expected ADP and ISM data surprising markets, resulting in higher yields and demand for the US dollar.
- We are however opening inside the previous session’s range (17.5800-17.9000)
- and this implies a market looking for new information.
- It also suggests that it is unlikely that the market will break out of this range ahead of tomorrows NON FARM PAYROLLS REPORT.
- Markets likely to follow the SP500 for clues on risk sentiment and this likely to be the driver this session.
Trade : Range trading 17. 5800-17.9200
- NB: we do have weekly jobless later today , but unlikely to be large movements.
- USDZAR : Expect a range 17.5800-17.9200
- Importers 17.6900-17.5800
- EURZAR : Expect a range of 17.4600-17.7300
- Importers 17.5500-17.4600
- Exporters 17.6400-17.7300
- GBPZAR : Expect a range of 20.0200-20.2900
- Importers 20.1100-20.0200
- Exporters 20.2000-20.2900
- USDZAR 17.7500
- EURZAR 17.6000
- GBPZAR 20.1600
- Eskom’s new chairman, Mpho Makwana, said the board isn’t planning any immediate changes to management and will take between 30 and 60 days to assess the company’s power plants.
- Makwana, said the plants’ performance will be looked at to see what needs to be done to make them operational at an average of 75% of the time.
- This was a target set by Public Enterprises Minister Pravin Gordhan.
- Currently their so-called electricity availability factor, a measure of when they can produce electricity, is less than 60%. NEWS24
- Eskom has announced that load shedding will be extended into the weekend.
- The utility said this was necessary due to a capacity shortage as a result of continued breakdowns.
- Stage 4 will continue until 5am on Thursday after which it will be downgraded to Stage 3 on Saturday. EWN
- Rand Water says its implementing stage two water regulations.
- This means the watering of gardens, use of hosepipes and filling of swimming pools is prohibited.
- Rand Water has enforced restrictions to help conserve water in Gauteng, which has seen levels drop due to demand.
- Power cuts have hampered the pumping of much-needed water in Johannesburg, Ekurhuleni and Tshwane and some areas have seen taps run dry.
- Gauteng has also seen a heatwave this week, which has exacerbated the situation. IOL
- US stock traders booked some profits and markets pared losses in the Wednesday afternoon session.
- The Dow Jones briefly turning positive before closing down 41 points as investors took advantage of lower valuation and energy stocks gained on higher oil prices.
- The S&P rose 0.1% and the Nasdaq fell 0.2%.
- Traders remain worried about more Fed tightening after the ADP report showed private business hiring was strong in September.
- Also ISM non-manufacturing data showed the services sector grew more than expected.
- Also, San Francisco Fed President Mary Daly, said the anticipation of cuts next year is misplaced and there is a high bar for slowing the 75-basis-point pace of hikes.
- Investors now are waiting for Friday’s nonfarm payrolls data.
- The US 10-year Treasury note yield rose towards 3.8% on Wednesday.
- The expectations the Fed will continue its hawkish monetary policy stance returned after ISM Services PMI figures and the ADP report suggested the economy remains robust.
- Earlier in the week weak ISM manufacturing data had investors wondering if specially the Fed could take a more dovish stance after disappointing data.
- The next big catalyst this week will be the nonfarm payrolls report on Friday which will provide a more clear update on the labour market strength and wage pressures.
- The yield on Britain’s 10-year Gilt edged up to 4% from a nearly 2-week low hit below 3.9% but remained well below a 14-year high of 4.5% reached last week.
- On Wednesday, PM Liz Truss said cutting taxes helps put up a sign that Britain is open for business.
- And the government announced on September 23rd a mini-budget worth £45 billion by 2026-27 that included several tax cuts.
- Investors worry about the sustainability of the UK’s debt levels.
- The Dow fell 42.45 to 30,273
- The SP500 declined 7.65 to 3,783
- The Nasdaq fell 27 to 11,148
Asian markets rallied after a late session recovery on Wall Street.
- In Japan, the Nikkei 225 gained 0.7% to close above the 27,300 level, and also rising for the 4th straight session.
- The index resisting weak global sentiment, with energy and technology stocks leading the advance.
- However, investor worries concerns about further monetary tightening from the US Fed kept sentiment in check.
- Traders also noting more solid US data, as well as rising oil prices and hawkish remarks from US policymakers.
- Geopolitical tensions also rising after Japan and South Korea said that North Korea fired another ballistic missile that likely flew over Japan.
- In Australia, stocks bucked the trend and closed lower following more remarks from FED policy makers that a FED pivot remains unlikely next year.
- The comments sent bond yields higher and stopped an Aussie equity rally in its tracks.
- The ASX 200 slipped 0.3% to below 6,800 , ending a strong two-day rally and tracking losses on Wall Street overnight.
- Investors took note of strong US data and upward pressure on energy prices after OPEC+ announced a large output cut.
- A rebound in bond yields also added pressure to stocks, with the benchmark 10-year Australian yield hitting 3.8%. Reuters
- The US Dollar recovered to post gains of 1.5% above the 112 level before pulling back sharply on a pullback in yields
- The resultant equity rally in Asia placing pressure on the Dollar and its safe-haven status.
- In choppy trade the buck tried to hang on to the 111 level, after it saw gains from the previous session on better-than-expected US data and hawkish remarks from US policymakers.
- Markets digested an ADP report pointing to another robust private sector hiring and ISM Services PMI data that beat estimates.
- Traders however aware of the NFP report on Friday and likely to be the next big catalyst for markets . FX news
- Crude Oil prices rallied almost 2% on Wednesday, with WTI futures rising to almost $88 a barrel and Brent crude to above $93 a barrel.
- Ministers from OPEC+ agreed to cut production by 2M barrels per day today, double the volume previously flagged.
- The move came despite pressures from the US, with Washington arguing that economic fundamentals do not support a reduction in production.
- Still, output cuts could have a smaller effect on global supply because several countries are already pumping well below their quotas.
- Meanwhile, the EIA report showed US crude stocks unexpectedly fell by 1.356 million barrels last week, the second consecutive drop and the biggest in five weeks.
- The drop further supporting prices as demand remains robust. Gulf Energy news
- Gold declined below $1720/oz as the Dollar recovered on the back of rising yields.
- Following stronger than expected US economic data, investors reassessing the likely path for US monetary policy.
- Analysts warned that it could be premature to bet on a dovish turn from the US Federal Reserve.
- Policymakers emphasizing the need to bring rates to restrictive levels in order to get ahead of surging inflation.
- Investors also heeded hawkish signals from the Reserve Bank of New Zealand, which countered dovish hints from the Reserve Bank of Australia.
- The RBNZ reminded markets that many central banks are still prioritizing the fight against inflation.
- But Bullion rallied nearly 4% in the previous two sessions as the dollar and Treasury yields retreated sharply from recent highs. Kitco metals