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Daily Dose

Daily Dose

Buongiorno,

On the wires…

  • US urges Sri Lanka leaders to ‘work quickly’ to address ‘discontent’
  • Hundreds protest against corruption in central China
  • Hot water wells in Hungary fuel switch from Russian gas
  • ‘Confirmed case’ of monkeypox in Limpopo, contacts traced as MEC calls for calm
  • Boks gamble against Wales, before series win, dumb- Wayne Rosenberg
  • Bangladesh beat West Indies in first ODI

Quote of the day…

“The function of leadership is to produce more leaders, not more followers.” – Ralph Nader

The indicators…

Currency crackdown…

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

Last week was quite important from a data perspective, with the release of Friday’s US employment data. That we had the numbers in the same week of the most recent Fed minutes, made it more interesting. The effects on the market have been another leg higher in the Dollar across the board. No currency has been left untouched, not even the Yen. It was a crazy week and a horrible weekend too. The demise of BoJo and the senseless murder of Mr Abe was followed this weekend by violence in local Taverns. Not only is the US economy taking its toll on SA’s financial sector but now we are experiencing mass shootings too. It feels all too surreal. I don’t even know if I should mention the 2 hours of my life wasted, spent watching Wales come from behind and win a test match of rugby against SA for the first time in their history. My brother, of current residence in Pentrecagal, was not very gracious.

Getting back to the US data, a stronger than expected increase in payrolls and unchanged unemployment rate caused a bit of confusion at first. The market seemed torn between a stronger employment market equating to a strong economy and therefore lower expectations of a recession. This versus higher interest rates (as intimated in the Fed minutes) meaning a weaker EM complex. It looks now guaranteed that we see a further 75bps hike at the next meeting unless inflation does and abrupt about turn which seems highly unlikely given oil’s stickiness above $100/barrel.

So, it is likely that the Rand continues down this path of poor performance over the next week or two. Continued high stage load shedding is causing havoc with the domestic economy and people’s general well-being. The future of Eskom as a viable company is not assured in my mind as companies and citizens find alternate ways of generating their own energy. This could eventually leave Eskom with a high debt level that it is unable to service meaning the poor taxpayer (of which there are increasingly fewer) to foot the bill. This confluence of both global and domestic events has caused a plethora of offshore funds to find alternate investment products away from sunny, but cold, SA. The outflow of cash has been consistent and with the mining sector struggling, the inflow that we saw has dwindled. So it is with a heavy heart that I believe the Rand is still on its road of doom and gloom with 17.05/10 firmly in sight. Above that is the bull flag target (highlighted last week) of 17.48/50.

Good luck out there and have a great week ahead

Support levels – 16.80/85, 16.6500, 16.4800, 16.20/25, 16.0000

Resistance levels – 16.9700, 17.05/10, 17.2500, 17.3800, 17.45/50

On the radar…

  • All – Russia/Ukraine Crisis
  • EU – Eurogroup Meetings
  • US – Fed Member Williams Speaks
  • UK – BoE Governor Bailey Speaks

Did you know?

Ending deforestation entirely would reduce annual global greenhouse gas emissions by as much as 30%

Have a champion week,

Wayne

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