The ZAR weakened throughout yesterday’s session , exacerbated by another high US PPI print.
- The Rand reached a weakest level of 17.3000, following the release of a higher than expected US PPI print.
- The data all but confirming that inflation remains stubbornly high and that the Fed’s hand is being forced to act.
- Today :
- This morning we opening with a stronger, bias after another topsy turvy session.
- The high PPI sent the ZAR weaker, but the poor economic data that followed, allowed for a recovery of 1.06 % .
- The ZAR opening in the middle of yesterday’s range.
- As we head into the weekend, there could be some Dollar profit -taking as USD longs have had a good week.
- Risk : Bostic talking, and any mention of 100bps, could see the unit weaken once again.
- Stock futures a trading off its lows, and unless it declines sharply it is highly unlikely the ZAR will go into free-fall today.
- NB: Next week Thursday we have the ECB (+25bps) as well as SARB (+50bps) expected – This is likely to be ZAR supportive.
- USDZAR : Expect a range 17.0400-17.2600
- Importers 17.1100-17.0400
- Exporters 17.1900-17.2400
- EURZAR : Expect a range of 17.0700-17.3700
- Importers 17.1300-17.0700
- Exporters 17.2500-17.3700
- GBPZAR : Expect a range of 20.1800-20.3800
- Importers 20.2400-20.1800
- Exporters 20.3350-20.3800
- USDZAR 17.1500
- EURZAR 17.1900
- GBPZAR 20.2800
- The EFF has called for an unprecedented national shutdown to demand the country back from what it calls an incompetent and directionless government.
- EFF leader Malema said the party, together with other organisations, will make demands to end load shedding, the reduction of fuel prices to 2018 rates.
- They also called for the immediate arrest of Ramaphosa over the Phala Phala farm saga. IOL
- The competition commission gave the green light for Amazon to set up shop in SA, stating there is no evidence that Naspers owned Takealot would be at risk
- Amazon is currently embarking on a large expansion to set up warehousing and distribution in SA.
- The commission added, even if that were to change, it would take a considerable period to build capacity and roll out and is still unlikely to dislodge the current leader.
- This is evident from many markets where Amazon was a relative new-comer unlike the US. EWN
- ESKOM continues with rolling loadshedding.
- Next week : the SARB expected to hike rates by 50 bps.
- Mercedes-Benz South Africa (MBSA) is opposed to the government subsidising electric vehicles (EVs) to make them more affordable.
- MBSA believes there should be parity between the import duties imposed on internal combustion engine (ICE) vehicles and EVs.
- MBSA added the import duty on ICE vehicles is currently at 18% and that needs to also apply to EVs, where an import duty of 25% is currently applicable. Moneweb
- US stock futures rose in Asian trade on Friday as investors await more bank earnings reports, with Wells Fargo and Citigroup set to release quarterly results later in the global day.
- In regular trading on Thursday, the Dow and S&P 500 fell 0.46% and 0.3%, respectively, while the Nasdaq added 0.03%.
- The moves came after disappointing earnings reports from JPMorgan Chase and Morgan Stanley.
- Analysts warning of downside risks this earnings season given the challenging macro environment.
- Investors also continued to assess the potential for even tighter monetary conditions against the backdrop of surging inflation and heightened recessionary risks.
- Traders remain fearful of a 100 bps Fed hike at the next FOMC.
- The 10 year, consolidated around 3% as investors assessed the outlook for tightening monetary policy after a hotter-than-expected US inflation reading.
- The US CPI rose to 9.1% in June, the highest since 1981, boosting bets on a possible 100 basis point rate rise by the FOMC, later this month.
- However recession talk growing stronger as the gap between 2 and 10-year bond yields widened by almost 30 basis points, the largest in over two decades.
- This closely-watched part of the US yield curve, viewed as a proxy for recession risks, has been inverted in the last several trading sessions.
- The Dow fell 142 points to 30,630
- The SP500 declined 11 to 3,790
- The Nasdaq added 3 points to 11,251
- image : Trading economics
- Crude oil recovered slightly, for the US WTI benchmark to settle around the $96/bl level.
- Prices rebounding from February lows as investors continued to assess tight supplies against the backdrop of low demand and a surging dollar.
- Oil prices remain pressured by fears of an incoming economic slowdown.
- Hotter than expected inflation figures in the US raised the odds the Fed will have to raise rates fast.
- Traders increasingly betting on a 100bps hike later this month.
- At the same time, demand concerns resurfaced out of China, due to a highly infectious Omicron subvariant, causing fears of a new mass lockdown.
- Supporting prices were, prolonged warnings that OPEC countries are near maximum capacity continued to be a point of concern regarding the long-term supply of energy. Energy news
- Gold prices below $1710/oz hitting levels not seen since April of 2021.
- Prices pressured by a rising dollar as investors increasingly bet the Fed will deliver a 100bps interest rate hike later this month.
- The move needed to curb soaring consumer prices.
- The Dollar continues to trade at 20-year highs and Treasury yields remain elevated.
- The buck supported by recent inflation and job growth data pointing to ongoing price pressures and a resilient labour market in the US.
- On the other hand, concerns over recession and stubbornly high inflation prevented the bullion to fall further.
- The Dollar jumped above 109, to set a fresh 20-year high, on the back of increasing bets the Fed will deliver a 100bps rate hike later this month.
- It would be the largest increase since the central bank started directly using overnight interest rates to conduct monetary policy in the early 1990s.
- Fresh data showed both consumer and producer inflation continued to accelerate in June, while the NFP report pointed to a tight labour market.
- The DXY is up more than 13% this year with the Euro hitting parity for the first time in 20 years and the yen trading above 139 for the first time since 1998.
- The CRB commodities index pointing to a slowdown already on the way.
- The index reached a peak of 350 on 9 June 22, and now trades at 291 . down 16.85%
- The index represents a basket of all the major global commodities with energy the last component.