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Daily Dose

Daily Dose

G Morning,

On the wires…

  • Boris Johnson apologises for attending party during lockdown in May 2020
  • Ukrainian soldier killed on eve of Russia-NATO talks
  • Chinese education firm laid off 60,000 people last year following a government policy crackdown
  • Western Cape counting the cost of four-day Kleinmond wildfire
  • Govt’s R1.1 billion gift to taxis was going to force them to formalise. Now, not so much.
  • Djokovic drawn to play Australian Open first round despite visa saga

Quote of the day…

“Do not take life too seriously. You will never get out of it alive.”- Elbert Hubbard

The indicators…

Currency crackdown

The world held its breath for the US CPI release yesterday. The $ got clubbed across the board, as the figure was released as expected, at a 39 year high- 7% year on year. I think the market was maybe even relieved that the figure was not higher than the expectation. The earlier than expected US interest hikes seem to be priced in, as the $ crumbled. To put the $ correction (take note) in perspective, it has lost a full cent against the Euro in 24 hours. Emerging markets enjoyed proper tailwind support and the rand traded to a low of 15.30. The weakness of the $ has been attributed to the less hawkish Powell comments on Tuesday, as well as the long $ positioning in the market.

Other indicators: Gold is slightly higher, although surprising not as high as we might have thought, seeing the level of $ weakness. Brent is unchanged, while US equity markets were higher last night. Asian equity markets are mixed. The Jhb Top40 was up 2.83% yesterday alone, volatility is alive and well (mostly commodity gains). US10 year Treasury yields are almost unchanged (reflect Powell stance), but have not moved lower as general consensus is still for 4 hikes in 2022. The SA R2030 has moved lower, with support from a stronger rand. Bitcoin has moved higher again and seems to be supported by those less hawkish interest rate views.

The rand has made impressive gains, but I must warn that the $ squeeze might be overdone in the short term. Liquidity is still not great so volatility remains heightened and must not be underestimated. We have US economic releases today which will have an impact. Be aware that any PPI figure higher than expected might give the $ some support. The opposite might apply, although in the short term the $ might be slightly overdone? Draw a line in the sand and react accordingly.

On the radar…

  • All – Omicron updates
  • US- PPI
  • US- initial jobless claims
  • EUR- ECB economic bulletin
  • EUR- ECB speakers
  • US- Fed speakers

Did you know?

It is estimated that two- thirds of $100 bills printed, are not in the USA

Have a terrific Thursday,

Wayne

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