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Daily Dose

Daily Dose

Good Morning,

On the wires…

  • Russia wants to weaken the rouble through purchases of ‘friendly’ currencies
  • NATO leaders denounce Russia’s ‘appalling cruelty’ in Ukraine
  • 7 killed in car bomb in Yemen’s Aden
  • Eight in court over Eskom cable truck hijacking in Cape Town
  • First-half blitz secures Junior Boks win over Ireland
  • Lukaku completes return to Inter on loan from Chelsea

Quote of the day…

“The only limit to our realization of tomorrow will be our doubts of today.“ – Franklin Roosevelt

The indicators…

Currency crackdown…

The rand traded on the back foot from the get-go yesterday, gradually weakening against all three majors throughout the session. A combination of dollar strength and rand weakness pushed the USD/ZAR pairing to a month high of 16.28 yesterday – the rate now sits around the 16.22 mark. The dollar itself saw further strength yesterday, reflected by a second successive 0.50% appreciation in the dollar index. However, the dollar index remained below the two-decade high of 105.79 struck a few weeks ago. This comes off the back of Cleveland’s Fed President Mester reaffirming yesterday that officials should act forcefully to curb price pressures. We now await initial jobless claims this afternoon, which may further impact the dollar.

The euro struggled to regain its footing on Thursday after tumbling overnight against a resurgent US dollar, which benefited from safe-haven demand – based on these renewed worries around higher rates and recession. The global view seems to be to prioritize inflation control at the risk of recession, with both Fed Chair Powell and ECB President Lagarde reiterating how important it is to bring down inflation when they met yesterday. Still the overarching worry for Europe itself is their energy supply going into the winter – there is therefore a feeling of caution around the euro.

The pound slumped yesterday, after Bank of England governor Andrew Bailey said that the UK economy was at a turning point and starting to slow – GBP has conceded 10% to the dollar over the last year. From a rand perspective, we will find out if South Africa’s PPI and Trade Balance data releases later today can provide the currency with some respite. Data released this week highlighted that foreign investors’ holdings of SA government bonds fell to the lowest level in more than a decade last month – we are perceived as risky in a risk-off environment, and so a sell-off of our debt is to be expected. Our inability to attract foreign capital could very well have a lasting impact on the rand.

The steady and aggressive global switch to tighter policy continues to stoke recession worries and shake financial markets, with stocks falling globally yesterday. Gold is also down, with oil the only commodity really holding its ground in the current climate

On the radar…

  • All – Russia/Ukraine Crisis
  • SA – PPI
  • SA – Trade Balance
  • US – Initial Jobless Claims
  • US – Core PCE Price Index
  • EU – Unemployment Rate
  • EU – President Lagarde Speaks

Did you know?

In North Korea, only military and government officials can own motor vehicles.

Have a happy Thursday,

Kyle

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