Key market drivers



Key market drivers: 1 – 4 February 2022



  • US labour data surprise on the upside in January:
    • US average hourly earnings accelerate by 5.7% vs market expectations of 5.2% (previously 4.9%).
    • Nonfarm payrolls rise by 444 000, which was well ahead of market estimates of 35 000. December’s outcome is revised from 211 000 to 503 000.
  • More Central Banks are getting ready to remove very accommodative monetary policy accommodation as rising inflation erodes consumer confidence and spending power:
    • ECB turns more hawkish as energy prices drive inflation to 5.1% (previously 5.0%). March meeting will be a key focus as policy normalization could commence later in 2022 instead of the previous dovish forward guidance. However, increase in wages remains more muted.
    • BoE hikes rates by 25bps at the second successive meeting, with four of the five members voting for an increase of 50bps rate.


The key take away for SA ZAR and bonds:  Volatility in global financial markets to remain more volatile

  • Monetary policy withdrawal will proceed in developed economies:
    • First stage: end of tapering in the US, UK, ECB (emergency bond programme to end in March, APP will continue).
    • Second stage: Rate hiking cycle commences (the UK already kicked off with two back to back rate hikes)
    • Third stage: Quantitative tightening – shrinking of balance sheets that will start in 2H 22
  • Inflation worldwide could start to moderate from 2Q 22 mainly due to base effects. This could influence the pace of rate hikes in Q4 22 and 2023.
  • The direction of USD remains challenging to forecast against EURUSD but could remain firmer against EM FX. However, EM FX such as the ZAR has already depreciated significantly in 2022, so we think the ZAR could remain range bound in a trading range of R15.00//$ to R16.00/$ in 1Q 22. Capital flows in to EM could remain light but higher commodity prices and the merchandise trade surplus continue to provide a buffer.


Key events/data that we are watching in the week ahead:



  • 10/2 US CPI inflation (Bloomberg consensus 7.3% vs 7.0%)
  • 11/2 University of Michigan inflation expectations
  • EU/Russia talks about finding a solution to Ukraine/Russia standoff


  • 7/2 SARB gross FX reserves (Jan)
  • 10/2 Mining production (Dec)
  • 10/2 Manufacturing production
  • 10/2 SONA (Key focus points: Corruption in context of Zondo commission reports; progress report on economic reforms (which have been slow) and what is on the agenda in 2022 (data spectrum, water, ports); extension of social relief of distress grant and thoughts around BIG; dealing with unemployment and social compact with buy-in from trade unions.