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Daily Dose

Daily Dose

Good Morning,

On the wires…

  • France’s Macron picks Elisabeth Borne as new prime minister
  • McDonald’s is quitting Russia after more than 30 years in the country
  • June’s fuel price hike will be a shock ‘never seen before’, warns AA
  • Second union announces plans to strike at SARS
  • Newcastle blow up Arsenal’s Champions League dream
  • Golfing legend Nicklaus turned down ‘$100 million’ offer from Saudi-backed tour

Quote of the day…

“The most beautiful things are not associated with money; they are memories and moments. If you don’t celebrate those, they can pass you by.” – Alek Wek

The indicators…

Currency crackdown…

FXOne would like to thank Warrick Butler from Standard Bank for his contribution to the crackdown this morning.

Good morning,

Current level: 16.0450/16.0550

Range yesterday: 16.1050-16.3200 and NY close: 16.1400

It does feel like the market is looking for a little stability, having had quite a strong period of risk aversion – only the normal safe-haven assets haven’t caught the bid whilst the world pushed the eject button. Not quite sure where all the money went, btu then again a lot of it was funny money anyway. All those Robinhood kids have taken a beating from the decline in the Nasdaq and Crypto-rubbish and their capital base has been decimated. With students loans due and interest payable on the up, it’s hard to see how a rebound in those Meme-assets is going to take place anytime in the near future. The world is still very much on the defensive with regards to inflation and growth. The war in Ukraine continues to undermine energy prices and now we have Finland and Sweden poking the caged and wounded tiger with their own NATO threats. I am not sure if the rumours of Putin ill health (both body and mind) are accurate, but if there is a lesson to be learnt from Hollywood here, the Joker movie should tell us something about pushing psychopaths to the limit.

The market is still wary of inflation with central banks falling over themselves to try and minimise the damage. Supply chain links have been broken and this is causing a growth issue. Double whammy means stagflation and the market has reacted. It is now all about how much has been priced in versus how deep the effects on the global economy are going to be. The S&P Index lost just over 19% from the peak at 4,818 in January to last week’s low of 3,858. That is a decent correction but by no means a guarantee that the worst is over. The period of consolidation that is in the early stages of forming, are a result of a market now in flying in a holding pattern. All eyes on US inflation and economic data in the coming weeks then. The Fed have pretty much spelt out their path through some guidance via statements and press conferences. It is basically 50bps per meeting with very little chance of a push to 75bps. The focus then should be more on the strength of economic growth in the US and the unwinding of the strict lockdown in China. The longer that continues, the harder it will be for equity markets (and risky assets) to recover.

So no miracle trade just yet. The Rand has held below 16.3500 a couple of times now and a push back below 16.00-15.80 could be in the offing soon, if we don’t see some horrendous data. The SARB will hike rates this week with the market expecting a 50bps hike. No chance of a 75bps hike either and I can’t imagine they will do less, given that petrol is about to jump almost R3.00 per litre next month. That just means that local data falls into the background of what is essentially a global problem. 

Recent lows of 15.9900 could and should be tested today and a break there will more than likely see the Rattler hit 15.80/85. Given that I still think we are in a period of consolidation, I am not going to be all gung-ho about positioning or picking a side, given the potential for a nasty surprise in the current environment. Just going to nurse all flow into the market as quietly and efficiently as I can.

Good luck out there and have a good day ahead.

Support levels – 15.8500, 15.5600, 15.4000, 15.1500

Resistance levels – 16.2000, 16.3500, 16.5000  

On the radar…

  • All – Russia/Ukraine Crisis
  • All – Covid 5th Wave
  • US – Retails Sales MoM & YoY
  • US – Manufacturing Production MoM & YoY
  • EU – Employment Change QoQ & YoY
  • EU – GDP Growth Rate QoQ & YoY
  • US – Industrial Production MoM & YoY
  • US – Fed Chairman Powel Speech

Did you know?

The Netherlands gives Canada 20,000 tulips every year as a thank you for protecting the Dutch royal family in World War 2.

Have an amazing day,

Keaton

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