overview

All eyes are on the U.S as they will be releasing their Non-farm payrolls later today. This will provide investors with much needed insight before their next move. Risk sentiment for the Dollar has since decreased as investors remain cautious before they see the jobs data report.

u.s and sa markets

Global stocks are rallying ahead of U.S employment data while treasury yields fell slightly after medium gains this week in the markets. The U.S private sector added 128,000 jobs in May.
Initial jobless claims fell from 211,000 to 200,000 which is less than expected, giving us the foresight that non-farm payrolls later could be positive for the Dollar.

The U.S has been giving us a lot of data this week, from low private labour data, which hints that the American economy is cooling, to high ISM manufacturing data and then finally yesterday releasing low initial jobless claims. Investors are eager to see what the Non-farm payrolls data will look like for accurate signs as to how aggressive the Fed will act in their next meeting which is this month. It is expected that the unemployment rate in the U.S could possibly have decreased to 3.5%.

South Africa’s government has charted new measures to ease pressure on locals as well as to slow down the high fuel prices in the country. South African’s have been heavily affected by the war in Ukraine which sent the fuel prices sky high, the government has since extended its fuel levy to give some relief to consumers. The cost of the fuel extension levy which was originally initiated in March, is roughly R4.5 billion. The SA factory output is still recovering from the widespread floods which were experience in April this year in KZN, the floods resulted in extreme loss and contributed heavily to the setback of our economy.

Technically:
The Rand has been strong in the markets and we can see the Rand is persistent on extending its gains. However, with the U.S non-farm payrolls due today, we will have to see how the markets play out and digest the data.
Investors remain eager and careful leading up to the unemployment data. The ZAR does seem close to the end of its downward run as we currently trade at R15.40/$. We expect that the pair will trade within the ranges of R15.40/$ to R15.85/. Should USD/ZAR break R15.40/$ the pair will likely test R15.27/$. We anticipate the unemployment rate most likely decreased in the U.S, which will give positive sentiment Dollar investors, resulting in Rand weakness

european markets

The ECB will have their monetary policy meeting next week where they will be deciding whether they will be raising interest rates or not. The EU has been struggling extensively as a result of the war between Russia and Ukraine. The ECB has signalled that they will most likely hike rates in July, will this be enough to save their economy is the question. Markets will focus on whether the ECB will hike rates by 25bps or 50bps and when.

Oil prices gained by more than 1% as the demand for the commodity continues to surge. This comes after the EU’s sixth package of sanctions against Russia.  Although OPEC+ stated that they would increase their oil production to roughly 650,000 barrels per day, investors are worried that this will not be enough to make up for the shortage from Russia. We can expect oil prices to continue its gains if OPEC does not keep its word as Russian oil remains squeezed by sanctions. Russian production has since fallen by roughly 1 million bpd after the sanctions. This could affect the Russian Ruble as well as emerging market currencies such as the Rand negatively.

Technically:
The EUR remains volatile in the markets as the EU economy battles to recover from the war and stagnant inflation. The EUR is currently weaker than the Rand and we anticipate that the pair will trade within the range of R16.50 to R16.85, however, should the ZAR strengthen further, we could potentially see around R16.40. The EUR/ZAR pair is facing pressure as it moves in a flag formation per our graph below.

UK MARKETS

The UK is currently on their second day of the Queen’s Platinum Jubilee which is a four day bank holiday in the UK, however, the Queen will not attend the jubilee today after much reluctancy and considering the travel. As it is a public holiday in the U.K, the Pound Sterling will be taking a break as well and will resume trade on Monday. The UK is still under strain of high inflation which is at a 40-year high in the country and the fears of a recession is still very likely in the country. UK growth manufacturing saw a 16-month low in May as the demand for exports slowed. UK retailers also warned of higher shelf food prices which are increasing at the fastest pace in a decade. British Retail Consortium’s Chief executive, Helen Dickinson stated that the increase in prices will get worse before it gets better.


Technically:
The Pound held its ground on Monday but has since declined leading up to their two-day holiday. The GBP is seen to be trading in a short term downward trend. Due to the fact that it is the Platinum Jubilee in the UK, the GBP is not trading so we do not expect much market movement on our side for the remainder of the day. The GBP/ZAR pair is expected to trade within the range of R19.28 to R19.79