ZAR: Rand Struggles Amid Eskom Power Cuts, Weaker Precious Metals
Sep-14 08:40
USD/ZAR ticks higher this morning, clawing back some of its losses from yesterday. The pair last deals at 18.8622, nearly 450 pips higher on the session. A break above 19.3301, the 76.4% retracement of the Jun 1 - Jul 27 sell-off, is needed to reignite bullish momentum. Bears look for a drop below 18.3805, which limited losses on Aug 24.
- Intensified power cuts continue to present a risk for the rand, with Eskom warning that South Africa might be on the brink of Stage 7 loadshedding and consumers should limit electricity consumption to help avoid that scenario.
- The SARB will announce its monetary policy decision a week from now. USD/ZAR 1-week implied volatility has crept higher this morning in anticipation of the rate decision.
- The composite BBG Commodity Index has edged higher but the precious metals subindex has shed ~0.6% to last operate near its worst levels since August 21.
- South Africa's July mining output data will hit the wires later today.
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CROSS ASSET: Equity Futures Dip in Early Europe; No News Driver Noted
Aug-15 07:40
- Equity futures dipping half an hour out of the European open and putting pressure on futures indices on both sides of the pond. Move looks largely contained to stock markets, but is adding to some USD strength: GBP/USD has now largely reversed the jobs-data inspired move higher and USD/CAD has cleared to fresh highs.
- A modest uptick in equity futures volumes keeping markets under pressure: just over 4,000 contracts changed hands at 0830BST/0330ET, for a cash equivalent of approximately $930mln.
- No notable headline or news drivers behind the move - with little on the schedule until German ZEW data at 1000UK time.
BONDS: Gilts lead the way lower
Aug-15 07:34
- Gilts the biggest underperformers this morning with higher-than-expected UK wage data the biggest driver across core FI space this morning.
- Gilt futures are currently breaking to their lows of the day - with an intraday low of 92.52 recorded at the time of writing, the lowest since July 11. The gilt curve remains in bear flattening mode.
- The German curve has seen a more parallel move - with Bund futures having hit a low of 130.75 this morning, the lowest level since July 10.
- TY1 futures have also broken below yesterday's low and in the process breached the 109-24 low of August 4. We are now trading at levels not seen since November 2022. The curve has bear steepened with 2-year UST yields only 1.0bp higher at writing.
- The highlights for today's session will be the German ZEW survey, US retail sales, Canadian CPI and US TIC flow data. In addition there will be a 15-year German auction and Schatz auction this morning.
- TY1 futures are down -0-8+ today at 109-23+ with 10y UST yields up 2.9bp at 4.222% and 2y yields up 1.0bp at 4.980%.
- Bund futures are down -0.51 today at 130.76 with 10y Bund yields up 4.8bp at 2.683% and Schatz yields up 5.0bp at 3.118%.
- Gilt futures are down -0.62 today at 925.56 with 10y yields up 6.1bp at 4.624% and 2y yields up 8.4bp at 5.144%.
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