The ZAR advanced on the back of a weaker Dollar ahead of today’s FOMC minutes release.
- The Rand strengthened to 15.6100, after broad-based Dollar weakness set in across the board.
- US Treasury yields falling, with the 10YT trading at 2.65% vs a high of 3.2% a few weeks ago.
- Investors concerned about high inflation and the FED’s aggressive policy that could lead to a slowdown in economic growth and in turn a recession.
- At the same time, investors scaled back bets on whether US interest rate hikes will drive further greenback gains.
- Traders comfortable that aggressive tightening by the Federal Reserve is already priced in.
- The dollar losing ground against all major EM & G7 currencies.
- Equity markets continued to range trade ahead of today’s FOMC minutes at 20h00 SA time.
- The tone of the language likely to drive further direction in the FX markets.
The data front
- Tonight : 20h00 US FOMC MINUTES
- Thursday : 11h30 SA PPI
- Thursday : 14h30 US GDP
- Today : Expect some more ZAR consolidation, with early profit taking ahead of the minutes tonight.
- Following the tone on Wallstreet and the fall in US treasury yields, the Dollar appears to be in a correction phase
- NB: The trend however remains for a Dollar Bull run as long as the Fed keeps on hiking rates.
- Traders now awaiting the FOMC minutes as more uncertainty grabs markets.
- USDZAR : Expect a range 15.5400-15.7700
- Importers 15.6100-15.5400
- Exporters 15.7300-15.7700
- EURZAR : Expect a range of 16.6300-16.9400
- Importers 16.7200-16.6300
- Exporters 16.8600-16.9400
- GBPZAR : Expect a range of 19.5200-19.8400
- Importers 19.6000-19.5200
- Exporters 19.7200-19.8400
| OPENING RATES
- USDZAR 15.6900
- EURZAR 16.8000
- GBPZAR 19.6700
- Ramaphosa maintains, Raymond Zondo was the best person for chief justice as EFF presses him for ignoring JSC’s choice.
- In March, Ramaphosa appointed Zondo, even though the JSC recommended Mandisa Maya.
- Ramaphosa subsequently nominated Maya for deputy chief justice. NEWS24
- Load shedding continues to destroy SA businesses with reports of multiple small businesses being forced to close.
- Despite a recent uptick in Covid-19 cases, possibly linked to a fifth wave of infections, hospital admissions throughout South Africa remain relatively low. BI
- Also, while hospitals are no longer inundated with Covid-19 cases, they’re now needing to compete with the country’s socio-economic shortfalls.
- In addition, leading healthcare provider Netcare, cited load shedding, rising fuel costs and a nurse shortage as key risks to its business model.
- The KZN floods continue to wreak havoc as news emerged that municipal employees went missing during the heavy floods this weekend.
- It is understood that their vehicle has been spotted in a river near Osindisweni.
- Officially the death toll stands at 400, with property damage in the billions of Rands. IOL
- South Africa’s middle class is having to make major adjustments as the rising costs of fuel, food prices and interest rates impact their way of life.
- Soaring prices of food, fuel and electricity among other items have been exacerbated by the Ukraine-Russia war.
- In addition, the fall in stock markets and the pandemic continues to add to uncertainty.
- Families and individuals say that they are quickly running out of options as salaries have not grown at the same rate as inflation for many years. EWN
- US stock futures rose on Wednesday after technology shares sold off overnight.
- Sentiment remains fragile following a warning from Snap that it will miss its own earnings and revenue targets.
- This morning, futures contracts tied to the three major indexes were all trading in positive territory.
- In regular trading on Tuesday, the tech-heavy Nasdaq dropped 2.35%.
- Adding to the uncertainty was Tesla, that continues to nosedive.
- Rumours of Elon Musk needing to sell Tesla stock to fund the Twitter purchase continues to weigh on the price.
- Tesla traded at $627.84 this Tuesday May 24th, decreasing $47.06 or 6.97 percent since the previous trading session.
- Looking back, over the last four weeks, Tesla lost 37.09 percent.
- Yields continue to fall as investors look for the safety of government backed bonds.
- Core government debt witnessed heavy buying pressure as investors rushed into safe-haven assets.
- This even as lingering concerns that soaring inflation and an aggressive tightening from central banks could tip developed economies into a recession.
- The yield on the 10-year US Treasury note, which sets the tone for corporate and household borrowing costs worldwide, eased to a four-week low of around 2.72%.
- Meantime, Germany’s 10-year Bund yield, the benchmark for Europe, bottomed below 0.95%. source: U.S. Department of the Treasury
- The Dow added 48 points to 31,928
- The Sp500 fell 32 to 3,941
- The Nasdaq declined 270 to 11,265
- image : Trading economics
- Asian markets mixed with Japan lower and Australia & China higher.
- In Japan, the Nikkei 225 fell 0.26% to close at 26,678, extending losses from the previous session and taking cues from a tech sell-off on Wall Street.
- Investors dumped stocks in the digital advertising space after Snap warned that it will miss its own earnings and revenue targets.
- SoftBank Group declined 1.7%, along with other technology stocks.
- Elsewhere, a Reuters poll showed that analysts expect the Nikkei share index to climb over 7% to 29,000 by year-end.
- Reasons given were Japan’s economic reopening, receding worries about Covid-19 and attractive valuations.
- In Australia, the ASX 200 Index rose 0.37% to close at 7,155 on Wednesday, as gains in financial and gold stocks outweighed losses in the technology sector.
- Australian banks jumped as rising interest rates lifted the outlook for the sector, with strong gains from Commonwealth Bank (1.1%)
- Gold miners also advanced on higher Gold bullion prices.
- Crude oil rallied to hit $111/bl.
- The rally erasing losses from the previous session on the prospect for even tighter global supplies and expectations of stronger demand.
- The new French foreign minister said, those opposing the EU sanctions on Russian oil could be convinced to change their stance.
- If successful the deal threatens to tighten global supply further.
- Across the pond, travel during the US Memorial Day weekend is also expected to keep upward pressure on oil prices.
- In addition, more American drivers are expected to hit the road and shake off Covid restrictions. Energy news
- Gold stabilised around $1,860/oz on Wednesday after climbing for five straight sessions.
- Traders citing, lower yields keeping the dollar under pressure.
- Meanwhile, gold held near two-week highs scaled on Tuesday as investors hedged against surging inflation and a challenging growth outlook.
- Safe haven buying also a factor, as the war in Ukraine escalates to the eastern flank of the country. Kitco metals
- The US dollar declined to 102 on Wednesday on the back of falling US Treasury yields.
- The dollar faced pressure in the past two weeks and tracked broad declines in Treasury yields.
- Traders citing fears that aggressive Federal Reserve rate hikes could tilt the US economy into recession.
- Atlanta Fed President Raphael Bostic warned that headlong rate hikes could create “significant economic dislocation”.
- He urged his colleagues to “proceed carefully” in an essay published Tuesday.
- Investors now await minutes of the latest central bank meeting for fresh clues on the likely path for monetary policy.
- Analysts also suggested that if inflation reads started showing signs of moderating, that could open up the possibility of a Fed pause. FX news
- The Euro extended gains to above $1.0700, the highest in 4 weeks.
- The move after ECB President Christine Lagarde said the ECB is likely to exit negative interest rates by the end of the third quarter.
- Traders were already boosting bets for higher borrowing costs after hawkish comments from ECB Knot and ECB Villeroy de Galhau last week. FX news
COVID-19 SOURCE https://www.worldometers.info/coronavirus/
Cases / Deaths / Recoveries
- Russia is now exposed to a historic debt default.
- Up until Wednesday, the U.S. Treasury Department had granted a key exemption to sanctions on Russia’s central bank.
- The exemptions allowed it to process payments to bondholders in dollars through U.S. and international banks, on a case-by-case basis.
- Adam Solowsky, partner in the Financial Industry Group at global law firm Reed Smith;
- … said “… Moscow will likely argue that it is not in default since payment was made impossible, despite it having the funds available…” CNBC
- Ukraine’s President Volodymyr Zelenskyy has said the situation in the Donbas in eastern Ukraine is “very difficult”.
- Russian forces are concentrating their fire and manpower on assaulting the region and seizing key cities there.
- WORLD 529,160,159/ 6,303,961 / 499,667,494
- USA 85,241,016 / 1,029,524 / 8,764,911
- SA 3,935,761 / 101,002 / 3,780,159