March 25, 2024

Currency News

MyCURRENCY News | Week 13 2024

MyCURRENCY News | Week 13 2024

What we know

If the comments in our weekly note are starting to feel a bit Groundhog Day’ish – I think most of our readers are still of an age to have seen this film – that’s unfortunately because very little has changed in terms of what’s driving the currency markets at present, and it really is all about the USD.

To quote Nedbank’s email of 19 March, “The Fed holding pattern of the rand”:   

The extent to how monetary policy influences currencies varies over time. Currently, monetary policy and the Federal Reserve (Fed) interest rate cycle are at the forefront. With the Fed on hold, the SARB matching the Fed in its policy stance and the first rate cut continuously being pushed back further into the future, it would make sense that the rand has been trading sideways in a broad range between 18,00 and 19,50 for almost a year now, unable to break out on a sustainable basis on either side. We expect this pattern to continue into May and most likely until the Fed finally embarks on a cutting cycle.

Last week was another excellent example of this, as the Fed kept rates steady for the 5th consecutive meeting, leaving the market to try and look for clues and interpret what the implications may be with regards to future Fed action.  A feeling that there may now be one cut less on the cards in 2025 was enough to get the USD going, as it traded up to one-month highs.

We really do wish we had a different story to tell our readers, not least because range-bound trading becomes boring for everyone after a while.  Nevertheless, periods of relative currency stability do provide market participants with some calm and certainty, allowing investment decisions to be made and importing and exporting activity undertaken, without the currency upending everyone’s plans. 

Apart from waiting for direction out of the US, local elections are now only 2 months away and remain the most likely other factor to introduce volatility into ZAR trading. 

What others say

Daily MaverickTransnet reveals details of plan to rope in private sector to fix its rail network

“The SOE details how it plans to embrace the private sector as a partner for delivery and fixing its rail network, but private sector players are concerned about high tariffs.”

The GuardianChina may be facing too many economic obstacles to hit its ambitious growth target for 2024

“The risks to the economy are both internal and external. Much has been made of the ailing property sector – the world’s largest – which shows little sign of a revival.

So long as households see their main asset dwindle in value, it’s hard to see any sustained pickup in consumer confidence.”

What we think

In our previous commentary we wrote that we were “…trading comfortably below the R19.00/USD big figure and at the best levels since the start of February” and were looking for “…an indication of how the US is managing inflation, and whether we are edging closer to an interest rate cut that should see the USD start to cool off further.”

Two weeks later we remain just below R19.00/USD as the aforementioned USD rally has predictably seen the Rand weaken in response.  We are nevertheless trading closer to the mid to lower three month ranges against the GBP, EUR and AUD. 

We anticipate a fairly quiet week ahead with many off for local school holidays and the upcoming Easter weekend.  We do have the local MPC interest rate decision on Wednesday, which is unlikely to be market moving, given very little has changed over the past few months and consensus remains for no change in rates.  If anything, Thursday and Friday may be more significant with GDP and personal consumption data out of the US, as well as a speech by Jerome Powell on Friday evening.  However, unless there is a major surprise in this data, we fully expect more range-bound trade throughout the week.

Our range for the week: R18.75/USD – R19.05/USD.

Have a great week ahead.