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Daily Dose

Daily Dose

Good Morning,

On the wires…

  • Biden to sign joint declaration with Israel’s Lapid to expand security ties and counter Iran
  • Germans could switch to wood this winter as Russia withholds natural gas
  • Bill Gates donates over R340bn to his own foundation
  • Transnet’s R93m corruption case implicating ex-CEO Siyabonga Gama postponed to August
  • APC embarks on countrywide protests as it seeks solutions to Eskom crisis
  • Cricket SA chooses financial security over Aussie ODI series

Quote of the day…

“The best time to plant a tree was 20 years ago. The second-best time is now.” – Chinese Proverb

The indicators…

Currency crackdown…

Markets were a bit jittery yesterday in the lead up to the US inflation release later in the afternoon. However, the rand was making steady gains as the day wore on – taking an open at 17.03/$ down to as low at 16.92/$ just moments before the CPI release. Things took a volatile turn from there, with the currency spiking to a day’s high 17.18/$ in the space of a few minutes after US inflation spiked to a fresh high 40-year high after accelerating to 9.1% (y/y) in June and in the process raising bets for a 100 basis-point rate hike at the Fed’s next meeting later this month. The rand recovered to low of 16.86/$ just after our close as investors digested the news and markets stabilised. Unfortunately, this has proved to be short-lived with the rand back above the 17/$ this morning following an overnight slide.    

Elsewhere, after teasing parity against the dollar over the last few days, the euro finally broke through the key level when it traded down to 0.9998/$. The euro is back above $1 is this morning but the scope for aggressive US rate hikes (possibly 100 basis-points, particularly after the inflation release), compared to the relatively modest hike (25 basis-points) expected from the ECB suggests that the outlook for the currency is not looking too good. The Bank of Canada’s decision to hike rates 100 basis-points (its largest move since 1998) shortly after the inflation release also supported bids for the Fed to make the same move. While central banks in Singapore and the Philippines also surprised markets with their own hikes.  Unfortunately, expectations for even steeper US interest rate increases that could sharply slow growth has steepened the inversion in the US yield curve (a precursor for a recession), further fuelling safe-haven demand for the dollar.

In other markets, Asian stocks were trading near 2-year lows this morning – dampened by expectations of aggressive interest rate hikes. Oil prices rose above the $100 mark as investors weighed tight supplies against looming global rate hikes. Meanwhile gold has continued its slide in the face of a stronger dollar and rising global yields.

On the radar…

  • All – Russia/Ukraine Crisis
  • ZA – Gold Production
  • ZA – Mining Production
  • UK – BoE Credit Conditions Survey
  • US – Initial Jobless Claims
  • US – PPI
  • US – Fed Waller Speaks

Did you know?

London is the world’s largest urban forest, with more than 8 million trees

Have a great Thursday,

Nyiko

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