The ZAR endured a volatile 2 days following the FED’s 75 basis point hike.
- The Rand was not spared from the global volatility spike following the Fed’s 75 bps hike.
- The local unit on Wednesday, traded at 16.1000 before rapidly gaining to 15.7600, only for it to lose ground back to 16.1000 before settling at the open of 15.9600.
- Traders and long term investors grappling with the news that the Fed wants to bring inflation to 2%, and by the looks of it does not mind a recession.
- Or erroneously in my opinion, think that the US & Global economy is strong enough to withstand a slowdown.
- The Bank of England did not hold back hiking for a 5th straight session and the biggest surprise of all, the Swiss National Bank hiking rates for the first time in 15yrs.
- The wide ranges leads me to believe more uncertainty on the horizon. With Energy prices the most likely leading indicator in this scenario.
- Stocks continue to trade in bear territory as investors exit risk assets.
- The Rand’s resilience ( if R16/$ is that ); mostly attributable to the SARB’s hiking policy, allowing for a carry advantage and also decent growth fundamentals.
- This as the economy grapples with Eskom, Floods, Strikes and Fuel hikes.
On the Data front:
- 14h45 : Fed chair Powell speaks – markets holding their breath for what comes next.
- 15h15 : US industrial production : 4.9% expected vs 6.4% previous
- NEXT WEEK
- Wednesday ; 10H00 : SA inflation 6.1% expected vs 5.9% previous ( ** this is above the SARB’s 3 – 6% Band) .
- And give a glimpse on what the SARB is likely to do next.
- Outlook for today:
- Expect a wide range of 15.7500 to 16.2500;
- Most local players taking a long weekend, on the back of the 16 June holiday.
- Likely result in poor liquidity conditions and a market vulnerable to moves either side of the open.
- NB: Keep an eye on Powell’s speech at 14h45 , and more hawkish comments likely to add to Risk asset sell-offs.
- Likewise if he tones down the rhetoric, we could see some ZAR gains towards the lower 15.80’s
- USDZAR : Expect a range 15.8400-16.1400
- Importers 15.8900-15.8200
- Exporters 16.0500-16.1400
- EURZAR : Expect a range of 16.6300-16.9700
- Importers 16.7500-16.6300
- Exporters 16.9000-16.9700
- GBPZAR : Expect a range of 19.4400-19.8400
- Importers 19.5500-19.4400
- Exporters 19.7600-19.8400
- USDZAR 15.9600
- EURZAR 16.8100
- GBPZAR 19.6100
- The fall out of the sharp petrol prices continues with union voices their concerns.
- Cosatu in KwaZulu-Natal, together with other organisations, will protest in parts of the province on Friday against the rising public transport fees due to the high fuel price.
- The main protest will take place in the Durban CBD.
- The union is unhappy with the recent petrol price hikes, saying South Africans can no longer afford it.
- With the high unemployment rate, Cosatu says the government must be challenged on the cost of living. EWN
- The N3 blockade that caused a congestion near Van Reenen’s Pass has now been cleared and the police said they have made arrests.
- Earlier on Thursday morning, a number of trucks were abandoned on the national route blocking both directions.
- The blockage disrupted some of the alternative routes between Johannesburg and Durban.
- However, both lanes have now been opened. News24
- DA leader John Steenhuisen said that the future of South Africa’s youth looked bleak and the freedom won in 1994 had not translated into economic transformation.
- On Thursday, Steenhuisen delivered his party’s Youth Day message in Alexandra as the country marked 46 years since High School students took to the streets to protest the education system.
- With the US announcing its biggest interest rate hike since 1994, local experts are hopeful that the South African Reserve Bank will not be so aggressive.
- The federal reserve bank in the US increased its benchmark interest rate on Wednesday by 0.75%.
- Alexander Forbes economist Isaah Mhlanga believes the SARB will be kinder to South Africans when it makes its next decision.
- “They’ve already done 50, they’ve got some insurance for them and given our inflation dynamics, that’s not as high and aggressive as what we’ve seen in the US and Europe.
- He added 25 basis points would make a lot of sense,” Mhlanga said. Reuters
- US stock futures climbed in early Asian trading on Friday as Wall Street tries to find its footing after a brutal week of selling.
- Traders trying to figure out the potential economic costs of the Federal Reserve’s ongoing fight with inflation.
- In regular trading on Thursday, the Dow lost over 700 points, falling below the 30,000 level, while the S&P 500 and Nasdaq tumbled 3.3% and 4.1%.
- This resulted in all three benchmarks to levels not seen since late 2020.
- The Fed also raised its benchmark interest rate by the most since 1994 on Wednesday, raising the risk of recession in the world’s biggest economy.
- The major averages are on track for another losing week, extending a relentless selloff that brought the S&P 500 deep into bear market territory.
- The 10-year US yield fell below the 3.3% level as investors dumped stocks and rushed into safe-haven assets on concerns that an aggressive tightening from central banks could tip economies into a recession.
- The FED raised its target interest rate by 75 basis points on Wednesday to address the highest inflation seen since late 1981.
- The Bank also projecting a slowing economy and rising unemployment in the months to come.
- The FED move was followed by the BoE, who delivered a 5th straight rate increase,
- But what really surprised markets, were the SWISS when the SNB raised its policy rate for the first time in 15 years,
- all sparking worries that other central banks could consider raising rates higher and faster. Source : US treasury
- The Dow declined 741 to 29,927 (-2.42%)
- The SP500 fell 123 to 3,666 (-3.25%)
- The Nasdaq dropped 453 to 10,646 (-4.08%)
- image : Trading economics
COVID-19 SOURCE https://www.worldometers.info/coronavirus/
Cases / Deaths / Recoveries
- Asian Markets mostly fell on Friday after Wall Street sank overnight, as recession worries grew after the Fed’s largest rate hike since 1994.
- The ASX and the Nikkei sank near 2%, each; and South Korean stocks were set to post their biggest weekly fall since March 2020.
- In Japan, the Nikkei 225 dropped 2.4% to below 26,000, hitting its lowest levels in at least a month.
- Investors brace for a key policy decision from the BOJ on the back of rising pressure from a weak yen and rising global yields.
- The BOJ is widely expected to maintain ultra-low rates and stress its resolve to support a fragile economy with massive stimulus.
- Japanese shares also tracked losses on Wall Street as the Federal Reserve’s aggressive fight against inflation fanned fears of a potential recession. TE
- Crude oil falling on the back of Demand concerns.
- Traders worried the FED’s aggressive policy action could lead to a recession and ultimately a drop in demand.
- WTI trading below $117/bl and North Sea brent at $119,/bl down from $124/bl reached a few sessions ago.
- Both benchmarks were headed for its first weekly decline since mid-April.
- Central banks across the world have raised interest rates this week, led by the FED’s 75 basis point rate hike amid a global fight against surging inflation.
- Analysts argued that drastic action was needed to get ahead of rising prices, but warned of a higher risk of recession.
- The IEA warned that soaring oil prices and weakening economic forecasts dimmed the future demand outlook. Energy News
- Gold traded $1,850/oz on the back of a rebound in the dollar and Treasury yields which put bullion on track for a weekly drop.
- The metal is currently down more than 1% in what has been a volatile week.
- The Fed delivering its largest hike since 1994, following a spike in global yields to combat inflation.
- However, concerns about the potential economic costs of an aggressive tightening kept markets on edge, providing some support to gold prices. Kitco metals
- US Dollar declined to 104, after setting a 20yr high above 105 earlier in the week.
- The move by the FED forced other central banks to consider raising rates higher and faster.
- The Fed delivered a 75bps increase, the largest since 1994, while Chair Jerome Powell said that a 50 or 75 basis point increase “seems most likely” at the next meeting in July.
- In response, today the Swiss National Bank (SNB) unexpectedly hiked its policy rate by 50bps to -0.25%, as well as the BOE raising rates for the 5th meeting.
- The BOE also said it’s prepared to unleash larger moves if needed.
- The moves providing support for Cable and the Swissy at the expense of the Greenback. FX news
- Investors now worried the FED might “ break something”.
- i.e. cause a recession as economic data shows a slowdown might already be on the way.
- Powell’s assurances that the economy was on a strong footing was met with deaf ears by investors who sold stocks aggressively.
- RBC Economist, Tom Porcelli in a note to clients said “With all due respect to that comment, it’s just not consistent with the data on the ground”.
- Quincy Krosby, chief equity strategist at LPL Financial added ;
- “What the market is worried about, even before you get to a recession, is a policy mistake, that the Fed breaks something,”
- and “The market also questioning his comment that the economy is strong.” CNBC
- WORLD 543,151,357 / 6,338,140 / 518,335,171
- USA 87,861,132/1,037,928 / 83,611,613
- SA 3,983,675 / 101,584 / 3,866,240