April 22, 2024
MyCURRENCY News | Week 17 2024
What we know
This week was a testament to the fact that regardless of the tight monitoring of interest rates and inflation, both globally and locally, the geopolitical tensions continue to provide grounds for sharp outlying exchange rate fluctuations that from a technical perspective, don’t necessarily make sense.
As such, while the rand spent most of the week in a small trading range from R18.92 – R19.10 on the dollar, we saw a sudden spike higher in the early hours of Friday morning when the rand moved from 19.10 all the way to 19.38 in just a few hours.
This move was around the time that Israel responded to Iran’s actions from earlier in week, pushing tensions around escalating conflict in the Middle-East to the highest they’ve yet been. During times of such heightened tension investors tend to shy away from higher risk currencies such as the Rand and tend to fall back on the Dollar as a safe haven amidst global uncertainty.
Unfortunately, the Rand does bear most of the brunt when sentiment shifts, and this is in part due to the liquidity and trading volume of the currency, meaning that when a more risk-off sentiment prevails, the Rand is the easily liquidated risk that is taken off. Fortunately, as more information became available regarding the overnight strikes, the market settled down with the Rand drifting back towards the range we saw for most of the week, closing off just above 19.10.
What others say
Moneyweb – Africa’s ultra-rich are fleeing continent as economic woes bite
“With African stock markets underperforming against global peers, local property markets facing headwinds, and currencies depreciating against the dollar, African investors have seen their wealth eroded on multiple fronts.”
The Guardian – Global defence budget jumps to record high of $2440bn
“For the first time, government military spending increased in all five geographical regions, Sipri thinktank finds.”
Investing.com – Top 5 things to watch in markets in the week ahead
“Earnings from the big tech names and another round of inflation data are due in the coming week, as a rally in U.S. stocks appears to be running out of steam partially due to worries that interest rates are likely to remain higher for longer.”
What we think
Last week we said,“Expectations around South Africa’s inflation rate, which will come out on Wednesday, indicate that we are yet to drop below 5.0% although a decrease from February is likely. Despite the predicted decrease in inflation, the SARB is likely to be underwhelmed by the March figure.”
The most significant domestic news released last week was local inflation, which came in at 0.8% (MoM) and 5.3% (YoY). Although it was good to see a slight improvement from previous releases, it’s certainly not enough to bring thoughts of an interest rate cut into the picture at this stage, as we are still far off the SARB’s 4.5% target for the rate cutting cycle to begin.
We have our Monetary Policy Review on Tuesday, and we expect receive a deeper insight as to how the Reserve Bank plans to manage the current situation, and their thinking around our Monetary Policy going forward.
Besides some vital manufacturing figures coming out of the US, UK, and EU, we can expect markets to trade relatively consistently this week, barring another outlier that leaves us on rocky terrain.
Our range for the week: 18.95 – 19.30.
Have a great week ahead.