The ZAR weakened in Friday trading after Dollar shorts booked profits near the lows following a 3.5% rally for the week.
- The Rand traded weaker, as traders ignored a risk rally on Friday, and the temptation to book profits are a strong week proved to strong.
- This morning, we opening at 16.6000, with the potential for a stronger ZAR.
- Equities remain well bid and the Dollar appears to be on the back foot following last week’s FOMC and GDP data releases.
- The data confirming the world’s largest economy had entered a recession.
- Recall the Fed hiked 75 bps, with a less hawkish tone from Fed governor Powell as well as second consecutive negative GDP print.
- On the back of the FED and the GDP data, bond yields declined sharply as investors looked for the safety of treasuries.
- The Dollar falling sharply across the board, with the index falling below 106 to open at 105.77 this morning.
- Inflation however remains sticky and the Fed gauge the PCE (personal consumer expenditure) rose to the highest level since 1982.
- This resulted in a dollar rally (also explaining the ZAR move).
- Bond yields (for now) at least pointing to a weaker Greenback in the next few sessions.
Significant data this week.
- 16:00 : US ISM MANUFACTURING for July : expected 52 vs 53 previous
- 13h00 : Bank of England Rate decision + 25 bps expected.
- 14h30 : US NON-FARM PAYROLLS +250K expected vs 372k previous
- 14h30 : US UNEMPLOYMENT RATE 3.6% expected vs 3.6% previous
- After a weaker close last week, following a spike in US PCE as well as profit taking, we once again open in RISK positive environment.
- The drop in US yields continues to support risk markets as traders bet future Fed policy likely to be less severe.
- The ZAR will benefit from this scenario as we expect EMFX as well as other risk assets to benefit.
- This morning, look for a sharp push lower towards 16.4500 before 16.3500.
- Weak longs likely to get stopped out as market makers ONCE AGAIN trigger weak stop losses ( EXPORTS).
- The local unit also continues to benefit from broad based dollar weakness.
- USDZAR : Expect a range 16.4500-16.7800
- Importers 16.5500-16.4500
- Exporters 16.6500-16.7800
- EURZAR : Expect a range of 16.7500-17.1500
- Importers 16.9000-16.7500
- Exporters 17.0850-17.1500
- GBPZAR : Expect a range of 20.000-20.4400
- Importers 20.1800-20.0000
- Exporters 20.3900-20.4400
- USDZAR 16.6000
- EURZAR 17.0200
- GBPZAR 20.2700
DROP IN FUEL PRICES.
- South Africans will get some relief at the pumps come 3 August 2022.
- The price of petrol (93 and 95 ULP and LRP) will drop by R1.32 per litre, 0.05% sulphur diesel by R0.88/l and 0.005% sulphur diesel by R0.91/l.
- Minister of Mineral Resources and Energy Gwede Mantashe said the main reasons for the fuel price adjustments are due to the average Brent Crude oil price decreasing.
- Oil prices declined from $115.77 per barrel to $105 during the period under review.
- Lower crude oil demand due to recession concerns and Covid-19 resurging in China and OPEC and non-OPEC members deciding to increase oil production. Moneyweb
- An effort to mount a rebellion against President Cyril Ramaphosa at the ANC policy conference has been neutralised.
- The ANC in KwaZulu-Natal appears to have conceded that their primary fight will occur at the December elective conference.
- A planned protest against Ramaphosa led by Carl Niehaus did not attract any support.
- The South African Revenue Service has marginally increased its wage offer to unions from 1.3% to 1.5%.
- While unions are not yet budging from their CPI plus 7% wage increase demand, they say they are open to a meeting should SARS request it.
- On Friday, 21 SARS branches around the country were closed for in-person visits. NEWS 24
- Last month (July ), the Dow gained 6.7%, the S&P 500 rallied 9.1% and the tech-heavy Nasdaq surged 12.4%, with the 11 S&P sectors all finishing the month higher.
- US stocks rallied in relief, after initial pessimism reached extreme levels.
- However, upbeat earnings reports from major companies and a less hawkish Federal Reserve sustained the move higher.
- This morning, the US stock futures were lower on Monday after the major averages capped off their best month since 2020.
- Data last week showed that the US economy shrank for the second straight quarter, while the Fed-preferred inflation measure hit the highest level since January 1982.
- Investors now await the July non-farm payrolls report to gain insight on the strength of the jobs market.
- The US 10-year declined below 2.7%, following a brief spike on the back of the PCE price index topped forecasts to reach its highest in over 40 years.
- The rise in the Fed’s preferred inflation gauge added to concerns that the US economy may continue to contract as the central bank moves to restrictive monetary policy to fight soaring inflation.
- However, treasury yields remained close to the 3-month lows touched the end of July.
- Traders citing, the worsening macroeconomic backdrop strengthened the appeal of safe assets.
- Investors continued to assess the extent to which the Fed may tighten policy by the end of the year, after the US GDP unexpectedly contracted for the second consecutive period during the second quarter.
- The Dow rallied 315 points to 32,845
- The Nasdaq gained 228 to 12,390
- The SP500 gained 57 to 4,130
- image : Trading economics