The ZAR continued to weaken in the face of a rampant US Dollar.
- The Rand weakened to 16.8500, on the back of a US dollar rampage that left all other currencies in its wake.
- The Euro and UK Pound suffering the most, the Euro declined due to ECB monetary policy and Russian Gas supply concerns.
- The Euro reaching a 20 year low.
- The Pound on the back of political instability, reaching levels last seen in March 2020.
- Locally the return to work of Eskom employees did nothing to support the local unit in the face of the Dollar rally.
- Last night, the FED minutes showed a Fed intent on fighting inflation and issued a hawkish statement in terms of maintaining “ restrictive “ monetary policy.
- However, it is important to note that the minutes was from last months FOMC meeting, when oil prices were at $120/bl and the economy remained strong.
- Since then, we’ve had a negative GDP and an oil price decline back to $100/bl as well as a decline in bond yields. (US10YT at 2.85% vs 3.25%)
- Thus : if the FED looks at the data, then we could assume Inflation might have peaked, and that the end of the month FOMC meeting, could be the Fed’s last ultra-hawkish meeting.
- On the data front we have US ADP (private payrolls today at 14h15).
- Historically, its been a poorly correlated to the actual payrolls data tomorrow.
- Friday : 14h30 : US NFP + 268k expected vs +390k previous.
- Today :
- This morning we opening with a weaker Bias.
- The local unit struggling in the face of global recessionary fears.
- NB: We are also at the top of range after a 4% loss for the week.
- Traders now waiting for tomorrows US jobs report, to give insight into future Fed policy .
- Fears of a Fed induced recession, the reason for the rush to buy safe-have US dollars and treasuries yielding +/- 3%
- Earlier the US 2Y yield exceed the 10Y ( NB: known as yield curve inversion and implying the likelihood of a recession).
- A break of 16.7000, opens up a return back to the R16.5000/$, as “ weak” longs likely to liquidate their positions.
- Likewise 16.8500 opens up 16.9400 (RISK OFF).
- USDZAR : Expect a range 16.5800-16.9400
- Importers 16.6800-16.5800
- Exporters 16.8100-16.9400
- EURZAR : Expect a range of 16.9400-17.1800
- Importers 17.0200-16.9400
- Exporters 17.1400-17.1800
- GBPZAR : Expect a range of 19.7200-20.1100
- Importers 19.9400-19.7200
- Exporters 20.0600-20.1100
- USDZAR 16.7500
- EURZAR 17.1000
- GBPZAR 20.0000
- Protesters in a city in South Africa’s north east blocked roads including a highway linking the country to Mozambique.
- Reports of truckers blocking roads as they demonstrated against fuel prices rising to a new record.
- The road between Mbombela, 350 kilometres east of Johannesburg, and White River has been obstructed by parked trucks.
- The same happening on the N4 highway connecting the city to the border with Mozambique and the port of Maputo
- There is also a group of protesters moving around the blockades, he said.
- With the on going energy crises, the DA’s public enterprises shadow minister said he’s written to ministers Pravin Gordhan and Gwede Mantashe.
- He was asking them exactly how much electricity is being sold to other countries.
- He said the country should be first in line as it faces a power crisis.
- He said “The DA is determined to understand the nature of these contracts,
- the veracity of these contracts and
- the efficacy of these contracts so that we can put our country first in this regard.
- We need to keep the lights on for our industries, for our citizens.” EWN
- Eskom announced it is rolling down the power cuts.
- This was hours after inking a deal with striking workers,
- Eskom has announced the downgrading of the rolling power cuts from Wednesday but has warned that it will take weeks before the system recovers to pre-strike levels.
- Businesses and households across the country have been hard-hit by stage 6 power cuts, which were implemented due to energy losses blamed on a wildcat strike at Eskom. IOL
- Fed governors continued to discuss that ongoing increases in the fed funds rate would be appropriate.
- They already backed another 50 or 75 basis points hike in July, according to minutes from the previous FOMC meeting.
- Officials also noted that the US economic outlook warranted moving to a restrictive stance of policy if inflation remains high.
- At the same time, they noted that policy firming could slow economic growth for a time.
- Governors believe the return of inflation to 2% as critical to achieving maximum employment on a sustained basis.
- US stock futures inched up in Asian trade on Thursday after the major averages finished higher in the regular session.
- Traders more confident in the Fed’s ability to manage inflation.
- In trading on Wednesday, the S&P 500 and Nasdaq Composite posted their third straight day of gains, rising 0.36% and 0.35%, respectively.
- The Dow also climbed 0.23% for its second positive session in three.
- Stocks climbed after the release of the Fed’s June meeting minutes, where officials reiterated a tough stance against inflation.
- Committee members saying another 50- or 75-basis point move would “likely be appropriate” at the July 26-27 meeting.
- Still, investors remain cautious about the market rebound amid mounting fears of a recession and the upcoming earnings season which is expected to stoke further volatility.
- The US 10YT yield rebounded to 2.94% after the release of the FED minutes.
- The minutes indicating the FOMC remains committed to fighting inflation, suggesting higher yields.
- Strong ISM data provided some respite for bond bears, but the negative GDP print cannot be ignored.
- However, Fed policymakers viewed that the current economic outlook made a more restrictive stance possible.
- The Dow added 69 points to 31,037
- The SP500 added 13 to 3,845
- The Nasdaq gained 39 to 11,361
- image : Trading economics
Asian markets all higher on the back of a late rally on wall street.
- In Japan, the Nikkei 225 jumped 1.47% to close at 26,490, erasing losses from the previous session.
- Traders taking cues from a positive overnight session on Wall Street, as investors assessed the latest Federal Reserve minutes.
- Fed officials reiterated a tough stance against inflation, saying another 50- or 75-basis point move would “likely be appropriate” at the July 26-27 meeting.
- In Australia the market also higher with the ASX 200 higher 0.81% to close at 6,648. The ASX erasing losses from the previous session amid a rebound in the materials sector.
- Australian shares also tracked overnight gains on Wall Street as investors assessed the latest Federal Reserve minutes.
- Heavyweight miners BHP Group (2.7%), Rio Tinto (4.1%) and Fortescue Metals (4.1%) led the rebound. Source : TE
Crude oil and the WTI crude contract fell toward $98/bl on Thursday and are down about 9% so far this week.
- Oil remains under pressure from mounting fears of a global economic slowdown and an industry report showing a surprise jump in US crude stockpiles.
- Escalating concerns that a looming recession will dampen energy demand has driven oil prices lower, despite signs that supply remains tight in the global market.
- The American Petroleum Institute (API) also reported that US crude inventories expanded by about 3.8 million barrels last week, defying expectations for a 1.1 million barrel drop. Energy news
Gold traded below $1,750/oz and remains near its lowest levels in 9 months.
- The yellow metal continues to be under pressure in the face of a rallying dollar.
- In addition, increased recession fears and expectations of aggressive interest rate hikes by major central banks drove investors out of bullion and into the dollar.
- Minutes from the Federal Reserve’s June meeting showed that policymakers agreed that borrowing costs will need to rise further to prevent inflation from becoming entrenched.
- This resulted in ramping up bets of aggressive rate hikes and strengthening the appeal of the dollar compared to gold. Kitco metals
The US dollar traded just below 107 but remaining close to its highest levels in 20 years.
- This was after minutes from the Fed’s June meeting pointed to consensus that interest rates need to rise further to prevent inflation from becoming entrenched.
- Policymakers emphasized the importance of fighting higher consumer prices, even if it hampers growth.
- This allowed for increases in bets that the Fed may hike its funds rate by 75bps this month and adding to the dollar’s safety appeal.
- Demand for the greenback was also supported by the looming energy crisis in Europe and political turmoil in the United Kingdom. Forex news
UK POLITICAL CRISES
- The number of resignations from U.K. Prime Minister Boris Johnson’s government hit 50 on Thursday morning.
- In what has been an unprecedented revolt against the embattled leader from within his own party continued.
- After multiple resignations on Wednesday, more ministers quit early on Thursday morning
- The 50th resignation came from George Freeman, a junior minister for science, research and innovation, at around 7.20 a.m. London time.
- The prime minister has thus far refused calls to resign, vowing to “fight on.”
- Johnson has been embroiled in a string of scandals and allegations of misleading the public,
- but the final straw for many MPs involves Conservative lawmaker Chris Pincher.
- The former deputy chief whip was suspended last week amid accusations that he drunkenly groped two men at a private members club. SOURCE : BBC