Markets Update with TreasuryONE

Range-bound Rand The rand has been looking comfortable between the R17.80 to R18.00 range, with the market moving in a very narrow range for most of the day. Late afternoon we have seen an increase in market movement, with the rand testing the R18.00 handle. The Greenback lost more ground against other majors early today but is grinding back late afternoon as markets perhaps look to close off posi...

Weaker than expected U.S. data U.S. job openings in February dropped to the lowest level in nearly two years, suggesting that the labour market was cooling. Along with the PMI number miss yesterday, data out of the U.S. is slipping a little. We will have to wait until Friday and the U.S. non-farm payroll number before we can see the state of a trend should the non-farm numbers disappoint. The U.S....

US PMI data lower Markets have been consolidating for most of the day, with the dollar creeping back losses it suffered. ISM Manufacturing PMI was expected to come in at 47.5, but the number came in lower at 46.3 as the US data continued to print lower. The rand tested R17.95 earlier as the dollar started to find some traction, but since the release of the ISM data, we have traded back to the R17....

US inflation continues to fall Consumer prices rose less than expected in February, the latest monthly update of the Federal Reserve's preferred measure of inflation showed, the core PCE deflator. The annual rise in core PCE prices edged down to 4.6% from 4.7% in Jan, matching the lowest it has been since the end of 2021. Looking at the chart, CPI, PPI and PCE are trending down, although the p...

Slightly risk-on The dollar has been trading under pressure for the day, with most currencies posting gains. The markets are starting to price rate cuts in the US more aggressively. This can possibly cause the US treasury yield curve continues to remain deeply inverted, an early indication that a US recession is looming. The market expects the Fed to not hike rates again and to start cutting inter...

Rand remains range-bound We previously mentioned that markets are calmer with stability in the financial system helping volatility to ease, but we have yet to see any sustained reprieve for the rand. Although the rand is 0.5% stronger for the day, we basically just regained ground lost yesterday. Markets are continuously focusing on US data and Fed speakers, but local issues have played their part...

Markets are calmer Should we say the calm after the storm, with markets calmer today than it was for most of last week? The fact that no new banks came under pressure over the weekend has helped the market ally fears from last week. US Treasury yields rose amid reduced demand for the safety of government paper as tensions in the banking sector eased. This has caused safe-haven assets like Gold and...

Markets treading water Markets are fairly calm this morning with bets on a pause in rate hikes by the Fed offsetting some of the concerns over the stability of the financial system and a possible US recession. US Treasury yields are lower at the short end of the curve with the 2-year quoted at 3.79%. The Dollar closed firmer against the Euro last night but lost ground against the Pound and Yen. Th...

A sense of calmness after the storm Markets have reacted positively after what people describe as a dovish hike by the FOMC last night, and we have seen the Volatility Index drop nearly 7% on the day. Equity markets and EM’s are finding life easier since, and we saw the rand test below R18.10 earlier today. This level has proven difficult for the rand to sustain a break below at the past two attem...

Rand rallies before FOMC Hours before the FOMC meeting, we have seen the US dollar trading near the 1.0800 level against the Euro. Whether this level will hold after the meeting is another matter. We expect the FOMC to hike interest rates by 25 basis points, citing the latest banking crisis in the US as one of the reasons why the FOMC will not go 50 basis points. The market will pay more attention...

The dollar has treaded water during the day, and we see the euro and pound up 0.54% for the day, while the Yen is slightly up as well. The impact of this has seen the dollar index dip further, quoted at 103.37. The 2yr Treasury Yield is slightly up this afternoon at 3.92%, but price action has been more stable today following the buyout of Swiss Bank Credit Suisse. Gold has been as volatile over t...

We have seen markets trading sideways with a slight sense of risk-off sentiment today after global banks concerns have taken over this week. The bailout of banks in Switzerland and the US has dominated headlines, while the ECB stuck to their 50bps hike yesterday as inflation remains a concern in the eurozone. Markets have calmed down following the bailouts and now fully focus on next week’s FOMC m...

ECB hikes by 50 basis points The ECB kept its promise by hiking 50 basis points despite the current market turmoil surrounding Credit Suisse, and the ECB warned that some banks might come under pressure with increased interest rate hikes. The ECB stated that inflation would be higher for longer. Thus, they had no option other than hiking rates. We have seen the US dollar trading slightly stronger...

Market Mayhem Equities markets are under pressure, with markets very alarmed about the possibility of a default by Swiss Bank Credit Suisse. Looking at equity markets, we see all major USD indexes trading well down, and therefore it is safe to say EM’s will not perform well either. The rand has lost 1.4% and testing the R18.40 level at the moment. This is far from the worst-performing currency for...

US inflation came in bang on the expected 6% y-on-y for Feb. US core inflation is also on the number at 5.5%. This gives the Fed the option to do no hikes rates at its next meeting next week, given the state of the banking system in the US. We have seen that the Us dollar is trading above 1.0700, which suggests that the market has moved out of US dollars and into Gold which is another safe haven....

SVB collapse shatters Treasury Yields The main topic today has been the collapse of Silicon Valley Bank, with Treasury Yields and Equity Markets both finding life difficult. The 2yr US Treasury Yield fell even further and dipped below 4% earlier today, while the 10yr yield is on 3.45%. This is important to understand because the 2yr yield has lost 100bps since Friday afternoon, with markets now he...

Unemployment rate the cat in the bag? The dollar has been under pressure after the payroll data were released, with the unemployment rate likely the guilty party for it. Yesterday we saw Jobless claims increased during February, while the unemployment rate rose to 3.6% for the February print. This places the FOMC betting on a resilient labour market under debate, and the focus will firmly shift to...

Market taking a breather The market is caught between the testimony from Fed Chair Powell the previous two days and the US non-farm payroll numbers that will be released tomorrow. Unsurprisingly, most of the market drifted sideways today, with the Rand being case in point with the currency trading within a 10-cent range and currently finding itself at R18.60. We did see the US jobless claims comin...

The rand managed to close below the major technical level of R18.55 yesterday but lost ground during the day to test a new multiple-year high of R18.70 earlier today. Since then, we have seen some recovery on the local currency, whereby it drifted back below R18.60. The rand is treading water in a vulnerable area, with Friday’s Non-Farm payrolls and next week’s CPI numbers likely the next pivotabl...

GDP disappoints The intensifying load shedding we saw has severely impacted the growth numbers. The economy shrank by 1.3% q-on-q versus the 1.8% growth in Q3. Loadshedding continued and probably intensified in Q1 of this year, so the prospects for Q1 of 2023 are not looking rosy. If we have another negative quarter of growth, the South African economy will find itself in recession. The economy is...

Big week ahead In the US, Federal Reserve Chair Jerome Powell will deliver testimony and take questions from lawmakers on Tuesday and Wednesday. He's expected to echo fellow central bankers in suggesting interest rates will go higher than policymakers anticipated just weeks ago. ECB's Lagarde is also due to speak on Wednesday. In Japan, the Bank of Japan's governor is set to make his final interes...

ISM Services better than expected US February ISM Services came out at 55.1 versus 54.5 expected. This means services are continuing to expand in the US, and things like dining out and paid vacations are continuing to grow, although it seems that consumer confidence is lower. After trading on the backfoot for the most of the day, the dollar is currently trading stronger after the ISM. Treasury yie...

Dollar trading firm The dollar is trading with new wind in its sails as Treasury Yields continue to rise. The 2yr yield has edged up to 4.92%, while the 10yr yield is up at 4.07%, creating the most inverted yield curve since the early 1980s. The market is seemingly pricing in that inflation is here to stay and that the Fed will need to keep Rates higher for longer, with the possibility of a 50bps...

Rand recovers some lost ground The rand recovered almost 40c from the high of R18.51 yesterday at a stage today, only to slip back in late afternoon trade. Some good data out of China added the rand’s recovery as there was some position squaring after the valuation of the rand was stretched, but ISM Manufacturing data came out and it showed that prices paid ticked up. This is a concern for the inf...

Rand struggles The Rand continues to struggle despite the weaker US dollar. The US dollar has moved out to the 1.0630 level against the Euro, with most EM currencies catching the tailwinds of this move except the Rand. The Rand is still stuck in the R18.35-50 range, with local issues anchoring the Rand with little strength. We have seen the Rand touching the R18.50 level, but like it has done a &n...