March 14, 2023

Currency News

MyCURRENCY News | Week 11 2023

MyCURRENCY News | Week 11 2023

What we know

Last week’s ZAR movement invoked dramatic images of us moving headfirst into a tsunami – well at least it felt like it while riding the ZAR all the way from the trough of R18.25/USD to the unpleasant crest of R18.71/USD. Fortunately, all the things that go up, must come down and even though our GDP numbers were well below what we were looking for, the sell-off was relatively short lived with the conclusion of the sell-off taking place on Friday morning as we prepared for the long-awaited US Non Farm payroll (NFP).

The US NFP came in stronger than anticipated, 311k jobs added vs 205k, though much softer than the previous month of 504k! At the same time the US unemployment came in at +0.2% higher, now sitting at 3.6%. This sent mixed signals to the market before finally settling significantly lower right back where we were last week at R18.25/USD. Although the previous data has helped sculpt the markets and their forward guidance, there will be much gleaned from the US CPI out at 14:30 today as well as their PPI out on Wednesday.

Our local mining data came out this morning, still negative for a 12th consecutive month, though it is the smallest negative print out of the bunch. A net positive result then, at least having beaten the consensus. The resilience of the mining sector throughout loadshedding is remarkable, though the toll on our economy as reflected in our GDP numbers means there is still a lot of ground to be made up. 

What others say

MoneywebSA economy: Battered and bruised, but not broken

“Unfortunately, South Africa is stuck in such a low-growth environment (some would say trap), but this is not necessarily a recession. Household spending was positive in the fourth quarter, and this is the largest component of economic activity when viewed from the expenditure side (as opposed to the production side).”

BloombergCredit Suisse finds ‘Material’ control lapses after SEC prompt

“In 2021, Credit Suisse suffered a multi-billion dollar hit linked to Archegos Capital Management, the family office linked to investor Bill Hwang. It subsequently issued a report that identified procedural deficiencies leading to the debacle. The bank has also completely reshuffled top management since then and is on its second re-boot plan in as many years.”

Visual CapitalistTimeline: The shocking collapse of Silicon Valley Bank

“While the collapse of SVB took place over the course of 44 hours, its roots trace back to the early pandemic years. In 2021, U.S. venture capital-backed companies raised a record $330 billion—double the amount seen in 2020. At the time, interest rates were at rock-bottom levels to help buoy the economy.”

What we think

Last week we said that “Sadly, there’s no sign of any obvious positive catalyst at the moment, barring of course that the initial movement to R18.50/USD on the back of our grey listing was seemingly an emotional response by traders – though that shouldn’t surprise us anymore. We were able to get back to trading just above the R18.00/USD level before finding some consolidation.”

With the large swings in the ZAR over the past couple weeks, this leaves the currency open to larger moves still as there are no pre-defined trading channels at present. The ceiling seems to still be at R18.50/USD (despite us breaking through it briefly last week), with our floor being around R18.10/USD. It’s a wide range and we seem to be yo-yoing between each level with ease. 

The go-to news event this week is US inflation which will either temper the Feds aggressive interest rate hikes or send the USD on a surge as rhetoric points to higher interest rates for longer.

Our range for the week: R18.10/USD – R18.50/USD.

Have a great week ahead.