The ZAR strengthened on the back of a strong Risk asset rally on Wall Street on Friday.
This week on the data front:
- The Rand managed to trade below 15.8000 following a strong risk rally on Wall street.
- Traders in the camp that the FED might have gone too far, too fast as economic data points to a realistic chance of a global recession.
- With inflation at multi-decade highs the FED has doubled down on their stance that inflation needs to be at 2%.
- Data however, suggests of rapidly declining economic activity, and that it has the potential to “sway” the FED.
- The US 10YR indicating this as traders buy safe have assets driving the yield towards 3% at the expense of the Dollar.
- For now, the market ignoring the ESKOM crises, as SA remains on level 4.
- However, the lifting of mask restrictions has been pointed as potential to increase economic activity.
- 14h30 : US durable goods f/cast is for -0.3% % vs +0.4% MoM
- 14h30 : US GDP growth QoQ -1.5% expected vs +6.9% previous
- 15h00 : ECB’s Lagarde and FED’s Powell once again on the speakers circuit .
- NB This will likely add to volatility.
- 11h30 : SA PPI with 14.7% expected Yoy vs 13.7% previous
- 14h00 : SA trade balance for MAY, f/cast is +R12bn vs +R15.49bn previous.
- Following the strong risk rally that continues in Asian trading, expect some more ZAR gains.
- NB: Early on expect some import profit taking, with rotation back up to 15.8700 – 15.9200
- Thereafter more ZAR gains
- The market likely to target 15.7000 – 15.6500 later in the session.
- NB: We also have SARB risk with high PPI data expected later in the week.
- With Risk rallying, it is highly unlikely that the ZAR will weaken significantly and we are now firmly below the 16 pivot.
- USDZAR : Expect a range 15.6900 – 15.9200
- Importers 15.7600 – 15.6900
- Exporters 15.8500 – 15.9200
- EURZAR : Expect a range of 16.5800 – 16.8400
- Importers 16.6700 – 16.5800
- Exporters 16.7400 – 16.8400
- GBPZAR : Expect a range of 19.3100 – 19.5100
- Importers 19.3800-19.3100
- Exporters 19.4600-19.5100
- USDZAR 15.8300
- EURZAR 16.7200
- GBPZAR 19.4200
- BRICS : South Africa’s total trade with other BRICS countries has seen a 69% rise since last year.
- President Cyril Ramaphosa emphasised the crucial role of the BRICS partners to help rebuild the country, especially in the wake of the COVID-19 pandemic.
- Government said South Africa’s trade with other BRICS countries reached just over R700 billion last year, up from R487 billion in 2017. EWN
- ESKOM : Eskom announced that stage 4 power cuts would continue until Wednesday after workers failed to report for duty at various power stations.
- South Africans are hoping that Eskom will provide more information on the fragility of the grid this week.
- This following an unprotected strike that plunged the country into a weekend of darkness.
- The unlawful strike action continues after a deadlock in wage negotiations between Eskom’s management and unions.
- In a bid to solve the crises, Eskom announced it selected 18 companies to develop renewable energy projects.
- The power utility will lease parts of its land in Mpumalanga to the bidders for this purpose. Source : Eskom twitter
- Ninety One, SA’s largest listed asset manager, with R2.8trillion AUM, said it was ready to swoop on cheaper shares after global rout.
- Despite consensus of a looing global recession, the manager said, that while it has trimmed the equity holdings in its general equity and balanced portfolios as part of a more defensive stance,
- … it is already looking to buy quality stocks, which are suddenly looking cheaper thanks to the recent market mayhem. Businessday
- US stock futures continued its climbed higher on Monday after a major rally and the end of last week.
- Investors trying to find their footing following this year’s sharp selloff.
- Last week, the Dow bounced 5.4%, the S&P 500 rallied 6.5% and the Nasdaq surged 7.5%.
- Mega gainers were Tesla (12.1%), Apple (8.9%), Microsoft (9.4%), Amazon (13.3%) and Nvidia (9.5%).
- Investors continued to speculate whether stocks have found a bottom or undergoing a bear market rally.
- Traders all expecting markets to remain volatile amid surging inflation.
- The 10-year US yield continued its recent decline towards the 3% mark, a level not seen in two weeks.
- Recessionary fears continued worry investors who climbed into safe-haven assets. Central bank actions of great concern.
- On Wednesday, Federal Reserve Chair Jerome Powell said that the central bank is fully committed to controlling prices, even at the risk of an economic slowdown.
- Money markets are now expecting 75-basis points rate increase in July, followed by a 50-basis points rise in September. Source : US treasury
- The Dow added 823 points to 31,500
- The SP500 added 116 points to 3,911
- The Nasdaq gained 375 points to 11,607
- image : Trading economics
- Asia Shares Rise were higher across the region, lifted by the rally on Wall Street on Friday.
- The Hang Seng +3% and the Shanghai Composite hit a near 4-month peak, boosted by the biggest daily cash injection in near 3 months made by the PBoC.
- Markets in South Korea, Japan, and Australia all were up over 1%, each.
- In Japan, the Nikkei 225 gained 1% to around 26,760 and in turn extending last week’s rebound and tracking gains on Wall Street.
- Investors bargain hunting and assessing if stocks have found a bottom or undergoing a bear market rally.
- Markets are also expected to remain volatile going forward as surging inflation, aggressive interest rate hikes and recessionary concerns continued to weigh on sentiment.
- In China, The People’s Bank of China (PBoC) injected a total CNY 100 billion into the banking system.
- It was the largest daily injection since March 31, to ease pressure from rising cash demand toward the end of the first half of the year.
- The PBoC added more cash into the financial system last Friday, because demand usually surges towards the end of the quarter.
- This is when commercial banks also have to shore up cash positions for an administrative quarterly health check by the central bank. Source : Reuters
- Crude continued its slide lower.
- In early week trading, Brent crude fell below $112/bl as the G7 nations discussed a price cap mechanism on Russian oil.
- Fears of a recession and a fall-off in demand also placing pressure on prices.
- Oil was also headed for its first monthly decline since November as investors worry over a recession spurred by aggressive interest rate hikes worldwide to combat surging inflation.
- Elsewhere, the US and Iran will reportedly restart talks over reviving a nuclear deal in the coming days, with the EU acting as a mediator.
- WTI also trading at $107/bl. Source Energy news
- Gold rallied to $1835/oz, following reports of a potential ban on Russian Gold imports.
- With Oil Russia have been able to continue to sell other commodities including Gold to raise revenue.
- The USA, along with the UK, Japan and Canada, considered the measure given London’s central role in the gold trade.
- Traders viewed the move that could potentially have a global reach and negatively impact Moscow’s ability to raise funds.
- This year (2022), Gold has come under pressure since March, due to Central banks raising rates across the world. Source : Kitco metals
- The US Dollar traded below 104 with recent declines tracking Treasury yields lower.
- Yields dropping on safe haven buying due to growing concerns about a possible recession.
- Fed Chair Jerome Powell said in a testimony to Congress that the central bank is fully committed to bringing prices under control.
- He said this was a goal even at the risk of an economic downturn.
- He acknowledged that a recession was “certainly a possibility,” reflecting market concerns that the Fed’s aggressive monetary tightening would hamper growth.
- Powell also said that the Fed will keep raising interest rates following a 75 basis point increase last week with 2% inflation the objective of the FOMC. Source : Bloomberg
COVID-19 SOURCE https://www.worldometers.info/coronavirus/
Cases / Deaths / Recoveries
- Ukraine- Russia
- G-7 nations to announce import ban on Russian gold as Moscow sanctions widen.
- The leaders of the G-7 nations will announce a ban on Russian gold imports for Moscow’s unprovoked invasion of Ukraine, U.S. President Joe Biden confirmed on Sunday morning.
- The U.K. government on Sunday also confirmed the move to ban Russian gold imports, saying it would apply to newly mined gold and refined gold.
- However, excluding gold that may have come from Russia but had already been exported.
- WORLD 549,031,174 / 6,350,924 / 524,036,717
- USA 88,794,286 / 1,040,805 / 84,513,615
- SA 3,992,036 / 101,731 / 3,887,400** We will continue to add the Covid stats only until 30 June 22, given the government’s decision to remove the face mask requirements.